Creating a will and trust are two of the most important steps you can take when it comes to estate planning. They are both important documents but serve different purposes. It’s important to understand the differences between a will and trust when deciding how to best protect and manage your assets in the future.
What is a Will?
A will is a legal document that states how you would like your assets to be distributed when you die. It allows you to dictate who receives your property, how much they will receive and how it should be distributed. The will also appoints someone called a Personal Representative. (The traditional term for this was “executor.”) This is someone in charge of carrying out your wishes. Wills must be signed and witnessed by two people in order for them to be legally binding.
What is a Trust?
A trust is kind of like a will. It’s also a legal document that states how you would like your assets to be distributed when you die. It allows you to dictate who receives your property, how much they will receive and how it should be distributed. But instead of appointing a Personal Representative, it names a “trustee.”
The most common trust is a “Revocable Living Trust.” That’s probably what you were thinking of when you came upon this blog post. With a that type of trust, you are the trustee during your lifetime. That means you are in control of everything just like you are now. And if something were to ever happen to you, a successor trustee can step in and take over managing your finances and property. The trustee of the trust has the ability and responsibility to protect, manage and distribute the trust’s assets according to your wishes.
The Differences Between a Will and Trust
The are two main differences between wills and trusts. First, wills usually must go through probate—a long and public process that involves filing paperwork with the court. However, a properly drafted, properly funded trust can avoid probate. In that way, a trust is typically faster to administer and more private than a will.
Also, a will is normally cheaper to set up than a trust. However, because wills go through probate, they can be more expensive to your family in the long run.
Common Myths About Wills and Trusts
Many people misunderstand wills and trusts, so it’s important to separate fact from fiction. Common myths include believing that a will is all you need to avoid probate or that trusts are only for the wealthy. In reality, both documents play an important role in estate planning and can be used by all individuals regardless of income. It’s always best to create both a will and trust if possible.
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