What is the Difference between a Trust and a Will?
Trusts and wills are two different ways to distribute and control your assets after your death. They have some key differences. Family trusts and wills are both worthwhile estate planning tools that can make sure your assets are protected and will pass to heirs the way you intended, says MSN’s recent article entitled “Family Trusts vs. Wills: What Are the Differences Between These Estate-Planning Options?”
This article tells you what you need to know about the differences between family trusts and wills to help you avoid estate planning mistakes.
Remember that without a will, the state probate laws will determine what happens to your assets. It may or may not be what you want. In contrast, a will lets you state to whom you want to distribute your assets.
Note that a trust permits the grantor (the person making it) to do what he or she wants with the assets. It also avoids probate.
A family trust is a wise choice for those who want to provide for the management of their assets if they become incapacitated, people interested in keeping information about their assets and who inherits those assets private and those who have a significant number of assets or a large estate. Here are some other situations in which a family trust would be appropriate to use:
- Asset protection from creditors and divorce
- For disabled beneficiaries who need to qualify for government benefits
- For tax-planning; and
- For cost and time efficiency over a lengthy probate process.
Everyone should have a will. It’s a way to leave bequests, nominate guardians for a minor child and an executor.
If you have a family trust, you still need a will. There may be some assets not owned by the trust, such as vehicles and other personal property. There may also be payments due you at your death. Those assets can be arranged to avoid probate if your estate plan is set up properly.
Once that process is complete, the assets are distributed to the family trust and are governed by its provisions. This is what is known as a “pour-over will” because the assets “pour over” to the family trust. If you happen to leave assets out of your trust, the “pour over will” will put those assets into it through the probate process.
Contact an experienced estate planning attorney to discuss the estate planning options available for you and your situation.
Reference: MSN (Aug. 27, 2021) “Family Trusts vs. Wills: What Are the Differences Between These Estate-Planning Options?”