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Home » Trust Vs. Will: Which Estate Planning Tool is Right for You?

Trust Vs. Will: Which Estate Planning Tool is Right for You?

Trust Vs. Will: Which Estate Planning Tool is Right for You?

When it comes to estate planning, you have several options. Two of the most popular are a trust and a will.

Trusts are often more complicated and cost more to set up than wills, but they also avoid probate and may save heirs substantial estate taxes. In addition, a choice is a great backup plan for those with assets in multiple states.

Distribution of Assets

When you set up a trust, you can choose the trustees to manage your assets. You also need to decide what percentage of your assets you want each beneficiary to receive. This requires a comprehensive knowledge of your assets’ value, including real estate and non-retirement brokerage accounts. Trustees should hire professionals to help with this process, particularly hard-to-value assets like timeshares and mineral rights.

You can also include the names of your beneficiaries and guardians for any minor children in your trust. However, you can’t name a guardian in a will, so you must include one in your faith and a durable power of attorney.

Now, let’s see the difference between a trust and a will. With a trust, you can distribute to beneficiaries while alive. This allows you to provide family members with income from trust assets while you’re living, and it may reduce the amount of estate taxes your beneficiaries have to pay when they inherit.

Unlike a will, a trust avoids probate, a public legal process. This lets the trustees distribute your estate’s assets more quickly and keeps your finances private. Additionally, a trust can provide tax benefits and protect the estate’s assets from creditors. This makes trust an excellent option for people with substantial wealth and privacy concerns.

Avoiding Probate Court

Most states have laws requiring that a court of law distribute assets, but there are ways to avoid probate. Putting your property in a trust is one way. Another is to make the account a joint payable on death with someone else, such as a spouse. Then, upon your death, that person takes ownership of the account without the need to go through probate. Some of the other ways to avoid probate include getting an appraisal, filing estate tax forms, and paying attorney fees, which are customarily a large percentage of the total estate settlement costs.

There are many reasons to want your family to avoid probate, especially if you have a lot of personal assets. The process can be expensive and time-consuming, but it is an excellent reason to use a trust (both revocable and irrevocable). A belief also keeps your affairs private compared to passing on real property through a Will, a public record.

Heirs can contest your will, but only for valid legal reasons, like mental incapacity when writing, undue duress if you are coerced into modifying your choice, or fraud. A lawyer can assist in making sure your will is valid. To ensure your wishes are understood and enforceable under the law, they can help with trusts and other legal instruments.

Keeping Your Assets Private

When you use a will, all your assets and personal possessions are left to your beneficiaries by the instructions specified in the document. You can list your financial controls, real estate, and other pieces of physical property; you can designate guardians for your children if you have any, and you can specify funeral arrangements and your wishes regarding remains.

You can write your own will, but having it prepared by a trusts and estates attorney is a good idea; this is a great way to help ensure that the document will be worded precisely and correctly, which will minimize the likelihood of successful challenges to its terms later. A lawyer will also ensure that the will meets all of your state’s requirements, reducing the chances of any problems in its enforcement.

One of the most significant benefits of using a Trust is that it can stay private and avoid probate, but this benefit is only a reality if you correctly fund your trust. It would help if you retitled all the assets you intend to leave to your faith so they are held in it. If you don’t, your family will be forced to go through the probate process to get them, which will be public records. An attorney can help you understand how to retitle your assets so that your Trust will be funded.

Keeping Your Beneficiaries Informed

A key aspect of estate planning involves ensuring your assets will be distributed according to your wishes. That isn’t always easy, especially when it comes to transferring assets that are already in multiple titles or accounts. A will can only control so much, especially regarding real property, and the beneficiaries listed on bank, mutual, and brokerage funds, retirement plans, and life insurance policies usually have their own distribution rules that override any instructions in a will.

Using a trust to control these assets can help, but it doesn’t solve all issues. A will should be used with a revocable or irrevocable trust to ensure your wishes are fully met. Besides naming beneficiaries and assigning an executor, you should also use a will to specify any final arrangements that need to be made.

The executor of a will must notify the estate’s beneficiaries and move things along reasonably, but they can’t distribute all the assets immediately after death. There are sometimes debts to pay, and creditors may need time to file claims. Keeping your beneficiaries informed throughout the process will reduce the chance of conflict or frustration. It’s also a good idea to list contingent or indirect beneficiaries in case any primary beneficiaries cannot accept their inheritance.