When you are preparing your estate plans, figuring out what is in the best interest of yourself and your family is of utmost importance. You may be considering your options further. For example, it is common for people to wonder whether they should implement a will or execute a trust.
There are many misconceptions regarding wills and trusts, one of which being that trusts are only for the ultra-rich. However, understanding the differences between wills and trusts can go a long way in helping you draw up estate plans that will be a good fit for your family.
What Is a Will?
Your will is a legal document that determines how your assets will be distributed to your beneficiaries and heirs as a designation.
However, your will can also include important instructions for how certain matters should be handled after your death, such as who will become guardian of your minor children, what your wishes are in terms of your burial and funeral, and how any debts will be paid. For a will to be valid it must be signed in front of a notary and two disinterested witnesses (witnesses that do not have any legal rights as a beneficiary).
What Is a Trust?
Trusts are a different type of legal arrangement where assets can be transferred from the owner to a trustee. Instead of taking effect upon the grantor's death, trusts are effective once assets have been transferred to them.
Many people assume trusts are not accessible unless they are wealthy. However, trusts are a great way for grantors to manage the terms of the trustee's assets, how assets will be distributed among beneficiaries, and when.
Trusts can be created after death in the form of a “testamentary trust” or during the grantor's lifetime in the form of a “living trust”.
Revocable Vs. Irrevocable Trusts
There are multiple types of trusts that may be available if you are interested in utilizing a trust as opposed to your will. Two of the most popular include:
- Revocable Trust – Grantors can create revocable trusts which can be amended or terminated at any time. Revocable trusts allow for grantors to serve as the trust's trustee, and will often continue as the owner of the trust assets for tax reasons. Revocable trusts describe who the successor trustee is, how the trust assets will be transferred and managed, and other critical details. The assets contained in a revocable trust have the benefit of transferring outside of probate court.
- Irrevocable Trust – In an irrevocable trust, the grantor is giving up their ownership rights to the assets that are being transferred into the irrevocable trust. These assets cannot be altered or controlled once they have been transferred. The grantor is not allowed to be the trustee of and a revocable trust, and they must be managed by another party. Once the grantor has given up control of the trust assets, the assets are not included as part of the grantor's taxable estate (after a period of time depending on laws).
If you are unsure whether a trust of any form is a good fit for your estate plans, do not hesitate to discuss your questions and concerns with your estate planning attorney.
Get Help From an Estate Planning Lawyer
Now that you have a better understanding of the differences between wills and trusts, you may be ready to move forward with your estate plans.
Get help drafting your will and trust when you purchase a will or trust on ncdocuments.com. We answer questions by phone, on your portal, email or through our quick contact form. Remember, every document comes with free legal advice from an experienced, estate planning attorney.