Wills v. Trusts: Which one is best?
All of us want to ensure that our loved ones are taken care after we’re gone. That’s why it’s important to prepare an estate plan to ensure everything is in place for when you pass away. Let’s dive into the details of estate planning and why it’s so important.
What is an Estate Plan?
An estate plan is a bundle of documents that outlines what will happen to your assets after you pass away, names people to handle your final wishes, and ensures your desired funeral arrangements are followed.
A standard estate plan includes a Will, a health care directive (also known as a living will) and a durable financial power of attorney. This type of estate plan is sufficient for most of us, but if you have a larger estate and want to avoid the probate court process, a Trust may be better for you.
What does an Estate Plan do?
Whether you choose a Will or a Trust, an estate plan will make sure your family is protected after you have left this world. In particular, all Simple Estate Plans allow you to:
- Outline your desires for what happens to your property after your death;
- Appoint someone to carry these desires out after you have passed; and
- Gift money and/or property to family, friends, and/or charitable organizations;
What is the Difference between a Will and Trust?
Ultimately, wills and trusts both allow you to say who will receive your assets. Each type of estate plan has its own advantages and disadvantages. When choosing your estate plan, it’s essential to know the difference between a will and a trust.
- A will is inexpensive; once you’ve signed and executed it, you’re done with it unless you wish to make modifications in the future.
- Unlike withdrawing a trust, revoking a will is much easier.
- Wills go through the probate court and, sometimes, a protracted legal battle.
- After you die, your will is generally made public, so everyone will know how you distributed your assets.
- If you own property in more than one state, you may need to go through ancillary probate processes in other jurisdictions.
- Using a living trust lets you leave your assets to your heirs without going through probate, which implies quicker distribution, particularly in jurisdictions with complicated probate laws Likewise, if you own property in many states, you may use a trust to transfer your assets without having to go through the court system.
- The privacy of your estate is preserved through a trust.
- A trust is effective immediately and can be managed until your death.
- The most challenging aspect of a trust is its establishment. Trusts are more expensive to prepare than wills because you must retitle your assets in the trust’s name, which requires time and money.
- If you do not retitle your assets, they will not pass through the trust and will instead be subject to probate.
So Will or Trust: Which one is Best for Me?
As we’ve discussed, a will is sufficient for most of us, but if you have a larger estate and want to avoid the probate court process, a trust may be a better option for you. If you want your spouse to manage all of your assets after your death, then have all your separate and marital assets distributed to your descendants after both of you pass away, you may want to create a Joint Trust.
No matter which you choose, you will be able to distribute your estate, leave charitable bequests, and specify your final wishes.
Should I have BOTH a Will and a Trust?
Fully protecting your family and other beneficiaries may require both a will and trust. Each has its own set of benefits and drawbacks, but they give more comprehensive protection when used collectively. Trusts, for example, do not enable you to choose a guardian for your children, although wills do. In the same way, your will can indicate your funeral desires, which a trust can’t accomplish. Trusts, on the other hand, can be used to prepare for unanticipated circumstances like infirmity or to do significant tax planning.
So how can you make sure your Trust-based Estate Plan also nominates guardians and indicates your funeral options? At Simple, we’ve made it, well…. simple. Each Trust-based Estate Plan comes with a Pour Over Will. This is a special Will designed to work cooperatively with your Trust. Essentially, the Pour Over Will is a backup plan in case you have not retitled assets in the name of your Trust. These assets will go through the probate court, then will be paid into the trust, and finally distributed by your trustee as per your wishes. The Pour Over Will also includes your funeral plans and named guardians.
The Rest is up to You
Now that you know the difference between a will and a trust, you should better be able to decide which estate plan is right for you. You can start your Simple Will or Simple Trust from your computer or smartphone. What are you waiting for? Stop making excuses and protect your family today, before it’s too late.
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