Despite the fact that everyone experiences it, death seems to be a taboo subject in today’s world. For example, even though more than sixty percent of people feel that it’s important to communicate their final wishes, only around twenty percent have actually done so.
Even though you may no longer be alive, your estate will still be around. And it can cause a lot of issues and stress for your friends and family if you don’t properly communicate how you intend to pass along your wealth. By knowing what a will and a trust are, and how they differ, you’ll be able to ensure that your estate is smoothly passed to the proper beneficiaries.
If you’re interested in learning more, then continue reading and we’ll walk you through what the differences are between a will and a trust and how to plan for them!
The Difference Between a Will and a Trust
You’ve most likely heard of the terms “trust” and “will” before. However, there’s a good chance that you may not actually know what the differences are between the two. Both of these practices are useful tools for estate planning but they each serve unique purposes.
A will and a trust can also work together in order to make a complete estate plan.
Perhaps the biggest difference between a trust and a will is that trust takes effect as soon as it’s created. A will, on the other hand, only goes into effect after you die.
A will dictates who is going to get your property after you die. It also appoints a legal representative to carry out your final wishes. Unlike a will, you can start to distribute property before you die, at death, or after your death, with a trust.
A trust is essentially a legal arrangement through a person, bank, or attorney who holds a legal title to the estate of a guarantor. The person who receives the property is known as a beneficiary.
There are typically two kinds of beneficiaries for trust. One type of beneficiary receives money from the trust during their lives. Another kind of beneficiary receives whatever money is left after the first set of beneficiaries dies.
Another major difference is that a will goes through probate court. When this happens, a court oversees the distribution of the will and makes sure that it’s valid. Trust doesn’t need to pass through probate and there’s no court involved.
A trust can remain private, while a will becomes part of the public record.
How to Plan a Will
The first step to writing your will is deciding who your beneficiaries are going to be. These will be the people who are going to receive your property, money, and other possessions. It’s important that you designate people by their full names.
You also want to make sure that your will is always up to date. It’s also a good idea to have backup beneficiaries in case your original beneficiaries aren’t available to receive your estate.
By hiring experienced estate planning attorneys, you can ensure that your will is clear, valid, and according to your wishes.
Next, you want to choose the executor of your will. This person will have the job of carrying out your wishes. You want to choose someone who you trust and who is responsible.
If you want, you can choose your lawyer or your bank as the executor. If you choose a friend or relative, then it’s recommended that you compensate them for their time and labor.
It’s also important that you first ask the person if they would take on the role of executor. Nobody wants to find out by surprise that they suddenly have to execute a person’s will without any preparation.
If you have children, then it’s important that you appoint a guardian. Like with the beneficiaries, you should also have backup guardians in case your original guardians die or get divorced.
And like with the executor, you should first consult your potential guardian in order to make sure that they’re up for the task.
How to Plan a Trust
There are four parts to a trust. You need a trust creator, the assets of the trust, the beneficiaries, and a trustee. The trustee is the one who administers the trust.
While you’re alive, you can act as the trustee but you should also appoint a successor for after you’ve passed away.
You should record what assets are going to go into your trust. You also want to know how these assets will be distributed and who will receive them. Finally, think about how long the trust should last and what conditions will cease its operation.
It’s then time to fund your trust. Take your documents to your bank and open up a trust fund bank account. You’ll have to provide the names of your trustees.
You can then deposit all of the money into the trust or pay in increments over time.
The Importance of Knowing The Difference Between a Will and a Trust
As we can see, there are some significant differences between a will and a trust. Depending on your financial situation, the size of your estate, and what your final wishes are, you should go over both vehicles and see which will be appropriate for you.
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