America’s population is getting older. It might surprise you to learn, then, that only 46 percent of Americans have a will. Despite how difficult it is to think about the end of our lives, things like wills and trusts are critical documents to draft early in your life and continue to update as things change.
What’s the difference between a trust and a will, though? Read on to learn all about these key documents in the estate planning field.
What Is a Will?
A will is a document that you prepare and goes into effect after your death. It essentially tells your next of kin what they need to do with your assets after you pass away. Wills go through probate upon your death, and then your assets are distributed.
The creator of the will is referred to as the testator, and the testator selects someone to administer the will, known as an executor. The executor distributes your assets according to the will, and they make funeral arrangements. Assets that you co-own automatically go to the co-owner, however.
There are many different types of wills, from a simple will to a pour-over will. Talk to your attorney about how to write a will that works for your needs.
What Is a Trust?
A trust is a legal entity that you form that can go into effect before your death. You are known as the grantor, and any successor is known as a beneficiary. As the grantor, you have the ability to select a trustee to manage your trust in the event that you become incapacitated or pass away.
Trusts allow grantors greater freedom to create conditions for asset distribution. For example, you can set aside money for your grandchildren, but access could depend upon their graduation from college.
One of the biggest benefits of trusts is that they don’t have to go through probate. Just like with wills, though, there are a number of different types of trusts available. Your estate planning attorney will help you decide which one works best for your needs.
Do You Need Both for Estate Planning?
You might need both. Trusts are preferable for a lot of reasons, mostly because they go into effect immediately and they don’t require probate. Trusts cannot be used to designate a guardian for any minor children you have in the event of your death, however.
If your children are grown, then a trust is a great option. If you have minor children, then you’ll need to augment your estate planning documents with a will.
Knowing the Difference Between a Trust and a Will is Important
Estate planning is something everyone should do, even if you don’t have significant assets or children. Learning the difference between a trust and a will is the first step in making sure that all your wishes get carried out at the end of your life. You won’t regret making this important life planning decision.
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