Estate planning professionals, especially lawyers, get a lot of questions throughout the estate planning process. One of the most common questions they get deals with the differences between a will and a trust. Before you can ask for a will or a trust, it is probably a good idea to understand what they are and why they are different.
The first difference between these two estate planning tools is that a will is a piece of paper, while a trust is a legal entity, much in the same way a corporation is a legal entity. A will is not powerless, but it is not its own entity. A will is basically a set of instructions the court uses to administer your last wishes. A trust is not based as much on your last wishes, and its more involved with management of property than distribution.
The only time a will is enacted is after the subject of the will has passed on. Prior to the death of the subject, a will has no power over any property distribution and it cannot be used to determine property ownership.
A trust takes effect the moment it is signed into existence. There is property that is moved into a trust that the trustee can transfer ownership of whenever they want. A trust can also be used to set up charitable funds during the subject's lifetime, and it can also be used to dictate business decisions and property distributions many years after the trustee has passed on.
A will is used to transfer property that is owned by the deceased. A will can only designate property distribution as it applies to the deceased, and it cannot dictate any other property ownership changes.
When a trust is created, property is transferred into the trust from anyone who decides to transfer it. Once a property is transferred into the trust, the trust as a legal entity owns that property can can transfer it to whomever it wants. A trust cannot say that it transfers all of the property of the deceased trustee to someone else because it is not a will. A trust can only transfer that property which it owns.
A will has to pass through probate before it is approved and acted upon. If the court finds anything wrong with the will, then the deceased's final wishes may not be honored.
A trust does not have to go through a probate process, which means that a trust does not have to take on the extra fees of a probate court and is a much faster solution. If you are looking for a way to get your assets transferred to loved ones without paying for a probate court and waiting months for everything to be finalized, then you need a trust.
A trust and a will are both powerful tools in the estate planning world, but they are very different. With a trust, you are creating an entity that can take on any property and distribute property as it sees fit. With a will, you are creating a set of instructions for a probate court for transferring ownership of your property after you have passed away. Only your attorney can give you the right answers when it comes to deciding between a trust and a will.
A trust is a legal arrangement that distributes assets to heirs after the trust owner has passed on. The primary reason people use trusts is to try and avoid the hassles and costs that come with going through probate.
Before you decide to utilize a trust, there are some basic facts that you need to understand. While a trust can be a good method for accelerating the process in getting your heirs their inheritance, there are some elements of a trust that you should understand before you get involved in one.
A trust is a great way to handle the distribution of your wealth after you have passed on, but it is limited in the other types of arrangements you may need to make. If you have a child with special needs, then you will need a will to outline what is to be done with that child when you pass on.
A will is the best way to make sure that your final wishes are honored, beyond taking care of the financial needs of your estate. While a trust can be more efficient than a will in some estate planning areas, a will is still an important tool to use.
When a will is filed or read in probate, the terms of that will are often made public. With a trust, the information regarding the inner-workings of the trust are usually kept private. One of the exceptions is if someone challenges the trust and the trust must be revealed to the court. But if you want to decrease the chances that your final financial arrangements will be kept private, then you may want to consider a trust.
A trust allows you to compound the protection offered by the FDIC on your bank accounts. Under normal circumstances, you are offered $250,000 in protection on a bank account in the event that the bank may fail. But for the people who have more than that in the bank, the chances of losing most of their money before they pass away remain real.
With a trust, your first five beneficiaries are each given the $250,000 bank account protection for a total of $1.25 million in federal insurance. The protection for six or more beneficiaries varies depending on the situation, so it is a good idea to have your attorney talk to the FDIC to see what would happen to your six or more beneficiaries.
In most cases, anything with a beneficiary on it such as a life insurance policy or a retirement account will get paid to the beneficiary without needing to go through probate. This means that you do not need to include these types of beneficiary arrangements in your trust.
When you decide to get involved in estate planning, it is important to hire the services of an experienced professional. There are several tools that can be used to get you the results you want when planning your estate, but only an expert knows how to use those tools to your advantage. Spend some time with your lawyer and understand how a trust could be a better way to get your money through probate and to the people who need it after you have passed on.