Trusts and Wills allow you to distribute your wealth and possessions to family, friends, and charitable organizations after you pass away. While wills and trusts share the same goal, they serve different purposes and operate differently from one another. Which one is right for your situation? below, we discuss the differences between wills and trusts and when to use them.
A will is a legal document that discusses how you would like your property and possessions divided among your beneficiaries. A will is a detailed list of your possessions and who you would like to give those possessions to after you pass away. These assets can be anything of value—from property deeds to jewelry.
A wide variety of items may be included in your will, such as family heirlooms or funds you would like donated to charity. You should also name a personal representative who will be in charge of helping execute your will and be the main point of contact between family members and the probate court.
A valid will needs to be written and typed, signed by you and two other witnesses. It is preferred that witnesses are not beneficiaries listed in the will, although it is not a requirement. Once the will is created, copies should be sent to your attorney and placed in a secure, locked place in your home. You should also tell your personal representative about your intentions and the will’s location.
- Complete control and access to your assets while living
- Appoint a legal guardian for minor children
- Assign specific assets to beneficiaries and include why
- Designate a personal representative to handle your estate
- Easy to modify
- Less expensive to create than a trust
- Still may require probate
- Lengthy estate administration
- May be contested in probate court
A trust’s primary purpose is to pass on the financial aspects of someone’s estate to beneficiaries. Trusts are financial agreements between you (the trustor), a trustee (a representative in charge of running the trust), and your beneficiaries. Trusts mimic business partnerships and are a suitable estate planning option if you have several types of financial accounts and interests.
There are two primary types of trusts: revocable and irrevocable. Revocable trusts automatically transfer property to beneficiaries but allow you to control the assets while living. Irrevocable trusts pass property to beneficiaries automatically but cannot be altered after they are created.
- Automatically transfer assets to beneficiaries while avoiding probate
- Easy to modify
- Avoid tax penalties when planning for Medicaid, life insurance payouts, or related arrangements.
- Does not cover personal property
- Does not offer creditor protection
- More expensive than wills to create
Whether you should create a will or a trust depends on your estate planning goals. In many situations, it is beneficial to have a will and a trust as a part of your comprehensive estate plan. A will would be utilized to specify beneficiaries for sentimental items and family heirlooms, along with appointing a guardian for your children. A trust would be used to ensure financial assets within the trust are automatically transferred to your beneficiaries without going through probate court.
Brian W. Hurd, an experienced Brevard County estate planning attorney, can help determine which estate planning tools are suitable for your family. Call our office at 321-453-5007 to schedule an appointment to discuss the best options for you and your family.