If you want to distribute your assets among your loved ones when you pass away, you must create a will or a trust. Both of these estate planning tools will ensure that your assets and property passes down to those closest to you according to your wishes. They both have the same purpose, but they also have differences that make people lean towards one or the other. The right estate planning tool for you depends on your specific circumstances and needs.
Wills
A will lets you determine how you want your executor to distribute your assets after your death. However, that is not the only purpose of wills. In a will, you can also specify who will be your legal guardian if you have a disability in the future, as well as who will be your children’s guardian if you pass away. A will can make you plan for the future and get a sense of protection by handling the legal matters that will arise upon your death.
As to the downsides with wills, the main reason why people choose trusts over them is that if a person creates a will, it will have to go to probate court before the heirs can receive their share of the estate. Probate is a process in which the court approves the distribution of a deceased’s assets. It is often long and expensive, but it also allows the heirs to challenge the will if they believe something is wrong.
Trusts
You can also determine how everything you own will be handled and transferred after your death with a trust. A trust will allow you to set the rules of the distribution and appoint a trustee so that they can oversee your assets’ distribution to those you name as your beneficiaries in the trust. The main benefit of trusts is that, contrary to wills, a person’s estate does not have to go to probate before the beneficiaries receive anything.
There are different types of trusts, but ultimately they come down to two different types: revocable or irrevocable trusts. Most people decide to set up a revocable trust because it allows them to change the terms of the trust and keep control of the assets they put in the trust while they are alive. With irrevocable trusts, the person who creates the trust loses control of the assets they transfer to the trust. The benefit of setting up an irrevocable trust is that the person’s estate avoids probate and is not subject to state or federal estate taxes upon their death.
The right choice
You can get assurance that your family will receive your estate by setting up a will or trust. By planning correctly, you can spare your family a fight over your estate if you pass away. Also, you can have them get a bigger share of your estate by allowing them to save on taxes and probate costs if you decide to set up an irrevocable trust. Both wills and trusts offer protection of your estate, but the right one for you will depend on what you need or want.