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Everyone needs to map out their family’s future, and one way to do that is by planning their estate. A good estate plan makes it easy for a person’s assets to be distributed after death. Estate planning comprises different components; however, wills and trust are a vital part of the plan.
“In the absence of a will or trust, the distribution of an estate will have to be delayed pending the completion of the probate process,” says estate planning attorney Kerri Castellini.
A will or a trust specifies how a person would want their estate handled in the event of their death. Preparing a will or trust may require employing the services of a hardworking attorney.
What is a Will?
When planning your estate, you may decide to draft a will. A will leaves a clear direction on how assets should be distributed among a person’s beneficiaries in the event of death.
Aside from estate distribution, a will may contain instructions on how the owner would want certain things done in their absence. One of the typical instructions that may be captured in a will is funeral arrangements and the appointment of a legal guardian for minor children. An estate executor is appointed and charged with ensuring that the estate is distributed as specified in the will.
For a will to be valid, it is required that two adults will have to witness the will-maker sign it. The adult witnesses must be aware that the document to be signed is the person’s will, and the signing is done by that particular person. The will must be filed with the probate court before its execution.
What is a Trust?
A person may decide to set up a legal arrangement where they place another person in charge of their estate to manage it in the interest of their beneficiaries. This arrangement is known as a trust. There are three vital parties in a trust, and they include:
- The trustor: this is the owner of the estate
- The trustee: the individual that the estate has been committed into their hands to manage on the beneficiary’s behalf
- Beneficiaries: the individuals on whose behalf the trustee is managing the estate
The trustee is legally bound to carry out their duty of managing the trust strictly per the conditions specified in the trust. Also, the management of the estate must be done in the best interest of the beneficiaries.
How Wills and Trusts Differ
Although both wills and trusts are alternatives to settling one’s estate, they differ in some ways. Some of the areas of difference include:
#1. Ease of Transfer
If the idea is to transfer your assets to your beneficiaries quickly, a trust is the way to go. This is because there is no need to go through probate. The probate process can last between 9 months to 1 year, which is a considerable wait period.
Many believe that a trust is specifically for people with a substantial amount of assets to transfer to their beneficiary, which is why fewer people set up trusts. However, this is not the case, as setting up a trust helps to ensure one has a higher degree of control over their wealth and can pass it down to their children.
#2. Privacy
A will has to go through probate, and once that happens, it becomes a public record. This means that the public can conduct a search and have access to the details of the will.
This is, however, not the case with a trust, as the proceedings are private. If the aim is to keep one’s estate private, then setting up a trust will help to guarantee that.
#3. Date of Implementation
The implementation date for a will is after the owner’s death. On the other hand, one can set up some types of trust that can become active even while they are still living.
A trust is a good way for one to protect their estate. This becomes more needed if one becomes mentally incapable of making critical decisions.
#4. Cost Implications
Whether you set up a trust or write a will for your estate, they have cost implications. However, to set up a trust, more paperwork will be required. This makes the process more costly than a will.
However, this cost evens out compared with the expenses incurred when the will passes through probate. So, while trust may be costlier in the onset, it is cheaper than a will in the long run.
#5. Ease in Preparation
A trust can be complex to set up, especially ones that become active while the trustor is still alive. A living trust, for example, will require that the trustor fund it intermittently. This will necessitate the change of title for one’s assets to align with the trust – a process that can be pretty complex.
On the other hand, setting up a will is less complicated. A person can successfully write a valid will without the help or presence of a lawyer.
In some states, all you will need after writing a will is for it to be witnessed by two mentally capable adults. Some states may require you to notarize the will after signing for it to become valid.
What Happens to My Estate If I Die Without a Will or Trust?
When a person dies without a will or trust, the court will appoint an estate administrator. The administrator will be responsible for paying their debts, handling funeral arrangements, taking care of their minor children, and distributing the assets.
A significant portion will be allotted to their spouse in sharing the assets, while the remaining will be distributed equally among their children. While the owner may want to distribute their assets unequally among their children, the assets are equally distributed in the absence of a will. Therefore, to ensure that your estate is distributed the way you want, it is best to write a will or set up a trust.
Which is Better?
Choosing between a will and a trust depends on one’s preference and the peculiarity of the situation. A will should be sufficient if you have a simple estate. However, some situations may warrant having a will and a trust. It is best to weigh both benefits and downsides and get advice from an estate planning lawyer before making a choice.
Bottom Line
For proper management of your estate, it is vital to have a will or a trust, as this helps to ensure the smooth transfer of assets to beneficiaries. Wills and trusts, although similar, differ on several levels. One should therefore consider their peculiarities before making a decision.
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