Did you know that only 16 percent of Americans aged 18 through 34 have a will or a trust setup? While you’ve probably heard of them both, it is important to know the difference between a will and a trust.
Knowing how does a trust work and how does a will work is important for deciding which is the best option for you and your family. It is important to compare a will vs trust because you’ll want to have your ducks in a row when it comes to your estate planning.
Thankfully, you’ve come to the right place to learn more about what is a will, what is a trust, and which is the right choice for you. Continue reading to learn everything you need to know about wills and trusts.
What Is a Trust?
There are a number of different things that you should consider when looking to set up a trust. Most people find that a living revocable trust is the best trust for their situation.
Living Revocable Trust
A living revocable trust is a trust that is active during your lifetime. Revocable trusts are a great option because they’re set up to allow you to change anything in it at any time. This is an amazing option for people on the younger end of the age spectrum because as you gain more assets and wealth you’re able to make changes to the trust.
With a living revocable trust, it is also important to remember that the property and assets listed in the trust remain under the ownership of the trustor until the time of their death. The trust doesn’t become fully operational until the time that the trustor passes away.
Once the living revocable trust is established, there are no fees that go to the attorney or the court. One of the best benefits of a trust is that the assets and property listed in the trust get immediately transferred to the beneficiaries of the trust upon passing away.
The other type of trust is called a testamentary trust. This type of trust is the more expensive of the two to create and then maintain. It involves appointing a trustee that controls the assets listed in the trust and follows the trustor’s wishes. They are also beholden to the trust document and the mandates that it has in place.
If you’re looking for a great and effective way to control your estate and ensure that your assets go to who you want them to, a tstementary trust is a solid choice. Testamentary trusts also avoid going to probate. This means you don’t have to pay a probate attorney and you avoid any court costs associated with trusts.
Most family members end up experiencing up to a year in probate court before they’re able to receive the assets that you’ve left to them. If you’re wanting to transfer your estate then a testamentary trust is a wonderful choice.
What Is a Will?
There are multiple types of wills, but the most common type of will is a testentary will. A testamentary will is a a document that is legally enforced that lays out how you want your property and assets distributed upon your death. It is also common for it to include how you want your funeral and where you want your memorial held.
When it comes to estate planning, the will is arguably the most important part. With the COVID-19 pandemic continuing, there are many different online options for setting up your will so that you’re prepared no matter what happens.
A wise approach to take is to work with an attorney to ensure that your will is tailored to your individual estate. The attorney will make sure that everything is taken into account.
You’ll find a number of things listed and included in a will. A will includes a list of all of your assets and all of your debts. These assets also include family heirlooms and the contents of any safe deposit boxes. Property and vehicles are the most valuable assets included in wills.
It is entirely up to you who you want to leave your possessions to after your death. A will lets you determine exactly who gets what after you pass away. It could be friends, family, or even charities.
Guardianship of Children
Wills also include the guardianship of your children if you have children that are still minors. If this is the case, it is vital that you name a guardianship so that your children have someone you trust that will be there to take care of them after you pass away.
If you neglect to name a guardian for your children, your surviving family will need to seek the help of a probate court to find proper guardianship for your children. Don’t leave it up in the air on who gets guardianship of your children, and be sure to name a guardian you trust.
What if You Die Without a Will?
If you die without a will, your assets and property go into a thing called interstate. This means that the state oversees how your assets are distributed. This also applies to the guardianship of your children. If you don’t name a guardian, the state will appoint one for you.
Most courts follow a formula of how to go about dividing your assets and this formula could have a negative impact on those that you love and care about.
Drawbacks of Wills
While wills are an effective tool for transferring property and assets to those that you care about after you pass away, there are some drawbacks that you need to consider. Upon your death, your estate becomes part of public records and anything that you leave behind needs to go through a probate court.
You’ll need to hire a probate attorney to help you through the journey of probate court. This is something that is completely avoidable unless you live in states that don’t have probate courts like California.
Now You Know the Difference Between a Will and a Trust
It is important when you begin the process of estate planning that you know the difference between a will and a trust. There are benefits and drawbacks to each, and you should do your research to determine which is the best option for you and your loved ones.
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