Both wills and trusts are practical estate planning tools, though there are some significant differences. While we all deal with differing lives, adversities, circumstances and income levels, it’s important to understand that estate planning is a smart idea for any individual.
Wills and trusts offer different securities based on each individual or family’s concerns.
Wills
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The primary purpose of a will is to legalize instructions that designate who receives which assets when you pass. If there is any property you wish to pass on to a loved one, a will is vital. If you pass away without a will, the state will control your property and choose how to distribute it.
In the case of state designations, if you have a spouse or children, they will likely receive most or all of your assets. If you have no living spouse or children, your property would be designated to close relatives. If the state cannot locate immediate family or relatives, they will keep your estate. A will can cover only property that is directly in your sole ownership.
Another benefit of a will is the ability to assign guardianship for any children that require support.
The downfall of a will is the probate process. Probate determines the legality before dispersing assigned property to the beneficiaries. This process can lead to family infighting and the possibility of litigation. The details of a will also become public record once submitted to the courts. Living trusts stay private.
Trusts
Three primary kinds of trusts, revocable living trusts, irrevocable living trusts and irrevocable trusts, all offer different securities.
Revocable living trusts: This type of trust is the most common. The person who creates and funds the trusts (the grantor), would act as the trustee while they are living to adjust the terms of the trust. The trustee can adapt any part of trust up to the time of their death if they are mentally able to perform the task.
Irrevocable living trust: When the grantor funds the trust with their property, the grantor assigns someone else to act as the trustee who will care for and control the assigned property. This decision is final and cannot be undone.
Irrevocable trusts: This trust has specific tax ramifications that can make them appealing to high-net-worth individuals.
While a will can only take effect once the testator (the one who created the will) has passed, a living trust can take effect the second it is legally signed. The grantor will often assign a trustee to take over the care of their estate after they pass.
Any property the grantor adds to the trust can be distributed as assigned, including life insurance policies and designated assets that are passed by contract.
The advantage a trust carries is that inheritors do not have to endure probate before receiving their property and assets.
Mental health comparisons
A will does not offer coverage for mental disabilities because they do not take effect until the testator passes away. If the creator were to become mentally incapacitated, costly court hearings would have to take place to assign a guardian to handle the affairs of the will.
Revocable living trusts allow the option of assigning someone to handle the care of their trust once they become mentally unfit to manage their estate.
Estate planning attorneys are a wonderful resource if you have questions regarding estate planning, estate litigation, succession planning or any other estate-focused affairs.
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