Determining the future of your assets after you’re gone may not be something you want to think about. But it’s one of the most financially responsible decisions you can make.
Wills and trusts allow for the control of personal belongings and their distribution before and after an individual passes away.
Although these documents have similar purposes, they have distinct differences that you need to understand when planning the financial future for you and your family.
Wills and trusts are essential to your estate planning, and choosing the right documents for your needs provides lasting peace of mind.
Failing to plan for the distribution of your assets leads to a number of issues. If a person dies without having established a will, it can result in confusion, conflict, and an inability to properly manage the estate by family members and loved ones.
Family members may disagree on how your belongings should be distributed. In some cases, they may spend months or years in court trying to sort out the details related to the assets you’ve left behind.
Wills and trusts are ideal solutions for estate planning. They provide you with a comprehensive plan that makes the asset distribution process much easier for everyone.
A will is a legal document that outlines your preferences for how your assets should be distributed at the time of death.
It indicates who the individuals are who will receive your belongings, and it names a representative who will be responsible for making sure that your decisions are carried out.
Wills can be applied to property that you own. However, any property that’s part of a trust or joint tenancy cannot be distributed through a will.
The administration of wills is typically handled by probate courts. It’s the court’s responsibility to confirm the validity of the document and distribute the assets according to the details outlined in the will.
Wills can be used to grant guardianship to any surviving children as well as include information related to funeral arrangements.
The Purpose of a Trust
Unlike a will, which describes the distribution of assets after your death, a trust is effective as soon as it’s been filed. It allows “trustors” or “grantors” to name a trustee to oversee the distribution of their assets.
Trustees handle the transfer of assets to the beneficiaries named in the trust. A living trust is a document that allows you to distribute your assets during your lifetime.
Individuals use trusts to distribute their property before and after they’ve died. The beneficiaries of a trust include those that are granted income from the trust throughout their lifetimes.
Once these beneficiaries have passed away, another group of beneficiaries will receive the remaining assets.
The property that’s distributed through a trust must be placed in the trust first. Also, unlike wills, trusts are not processed through the court system. This makes the distribution process easier and less expensive.
Wills and trusts serve similar purposes in estate planning. But they each have their unique benefits and limitations that need to be understood when planning your estate.
Understanding wills and trusts makes it easy for you to transfer assets to your loved ones and have the confidence in knowing that your estate wishes will be granted to when you’re gone.