“Nothing can be said to be certain, except death and taxes.” Although Benjamin Franklin said these words many years ago they still ring true today. The key differences between a will vs trust can help you plan for both of life’s certainties.
A little bit of planning can go a long way after you die. It will remove the obstacles your heirs would otherwise face. This article will cover the differences between a will and trust and help you decide which one is best for your circumstances.
Will vs Trust
Leaving behind money or possessions to your spouse after you die is generally not an issue. The United States Estate and Gift Tax Law includes an unlimited marital deduction provision that allows passing wealth to your spouse without having to pay estate or gift taxes on the assets.
The process becomes much more complex when it involves passing wealth down to your children or grandchildren. If your assets are titled properly and individually owned this process can be easier.
When mistakes are made on the titling of assets that are individually held or with beneficiary designations it can tear apart even the closest of families.
Since leaving behind money or possessions to your spouse is a relatively easier process this article will focus on transferring assets to your children or grandchildren.
Over the years we’ve seen it all. A case where a person’s ex-spouse was still listed as the beneficiary on a banking account which held a considerable amount of assets and another where both parents died tragically in an accident with no plan in place that chose a guardian for their children.
Don’t let these situations happen to you. Putting together a plan doesn’t take a long time and it can save your family from heartache.
A last will and testament as it is formally called is a legally enforceable document that directs how you want your affairs to be handled and your assets to be dispersed after you die. It is only effective after your death and it is an important part of estate planning.
In your will, you can name an executor or personal representative. This person will be your legal representative and help carry out your wishes after you’ve passed.
Your executor is apart of your estate administration meaning they will collect and manage your state, pay taxes and debts, and distribute the remainder of your assets to your named heirs.
If you have minor-aged children it is also essential to appoint a guardian. If you do not appoint a guardian, your family will have to go to probate court to have a guardian appointed, and this may or may not be the person you had in mind to take care of your children.
After the death of a loved one, their will can address how they want their assets to be used within reason. Children have a right to inherit. A will allows you to disinherit a child if necessary.
You may also choose to disinherit a spouse under special circumstances. Each state has different laws and stipulations regarding disinheriting children and spouses. Your attorney can help you navigate the laws of your state.
You will need a lawyer to help you create a will to effectively transfer your property after your death.
There are a few drawbacks of a will that you should be aware of. Your state will become part of the public record. Anything left by a will must go through probate court. Probate can be expensive and this is not avoidable.
A trust is another common method of estate transfer. In a trust, you give another party authority to handle your assets for the benefit of your beneficiaries.
The trust administration refers to the trustees’ management of the trust property. They distribute the property according to your trust document’s terms.
There are many types of trusts and they can be created for a variety of purposes. For our purposes, we’ll focus on two main types: a testamentary and living trust. Your will can establish a testamentary trust.
A revocable living trust can help you avoid probate court.
The purpose of a revocable living trust is to transfer property to loved ones after your death. It is created while the property owner is alive and can be changed during your life.
The trustor maintains ownership of the property up until their death. After death, the trust is put into action. The property is passed along without probate court.
There are no attorney’s fees or court proceedings with this type of legal document. Your property is passed immediately to your named beneficiaries.
Trusts are not expensive to create. A trustee will be named in the document to control the distribution of assets and follow the wishes and mandates of the trust.
A trust is an effective way to control the passing of assets after your death and avoid probate court.
Try to avoid probate court. Your heirs could spend months sorting through your estate planning and transferring assets if your will is not laid out properly. They could lose money in the process from the attorney’s fees and court costs.
Probate court is where the court will examine your will, appoint legal guardians for minor-children, select executors, and sometimes set up trusts for your survivors.
Your executor will remain responsible for sorting out your estate and it can take many months depending on how intricate your case is.
Imagine your eldest child spending a year of their life traveling back and forth to go to court to take care of your estate when they should be spending this time mourning your passing with their family.
It’s not fun but that is usually what happens in probate court without a clearly drawn out will or trust.
Make a Plan For Your Estate
These are the differences between a will vs trust. Use this article to help guide you to which is better for your situation.
Smith Barid is a law firm in Savannah Georgia that helps clients prepare for the inevitable surprises in life. We focus on estate planning, probate, and trust administration.
Let us help you put in a plan in place to pass down your money or possessions to your heirs after your passing. Contact us today and let us help you put a plan in place.