When someone decides to start planning for their financial future, trusts and wills are some of the most common ways to determine where their assets will go when they pass away. One mistake that many people tend to make is assuming that trusts and wills are the same. Though they do have similarities, trusts and wills do not have the same capabilities.
Wills, otherwise known as a “last will and testament” are planning documents that outline where your assets go when you die. Wills allow you to designate who receives your property and appoint an executor to carry out the terms of the will. These are some of the easiest estate planning documents to produce, yet they have several shortcomings.
One aspect of wills that could have a negative impact is that they are always subject to probate and become public documents once filed in probate court. This often leads to litigious disputes between family members who believe they were unfairly omitted from the will or feel the need to contest the validity of the document. These disputes are often very expensive and may drain the resources you leave for your family before they fully receive them.
Due to the simplicity of wills, some people decide to execute a "Holographic Will". A Holographic Will has certain statutory requirements, but does not need to be prepared by an attorney, and does not have the same witness requirements as a formal will (i.e., typed).
When you have a trust, described below, you will commonly receive a "Pour-Over Will" as part of the package. A Pour-Over Will is a document that is designed to transfer any assets remaining in your name after your death (i.e., assets not held in joint tenancy, without a beneficiary, and not held in trust) into your trust through either small estate administration or formal probate administration.
Trusts do have many of the same abilities as wills in terms of where your assets are supposed to go upon your passing, but offer several additional advantages as well. Once you have appointed a trustee to administer the assets you place in the trust you are able to place as much or as little of your property as you wish within the trust, with certain exceptions (i.e., retirement accounts). These assets can also be accessed at any point in time as needed over the course of your life.
Here are some key advantages that trusts hold over wills:
- They can be made revocable, allowing you to amend the terms of the trust.
- They do not become public documents, unless there is litigation.
- They are not subject to probate administration.
- They allow for a successor trustee to assist during your lifetime.
- Allow for greater control to plan for various different situations.
Since trusts allow for more detailed and in-depth control over your assets, they do take longer to finalize than wills. It is wise to consult with professional estate planning services when planning a trust due to the amount of administration they require.
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We understand that planning for the future may seem like a daunting task. We aim to provide experienced and compassionate legal guidance to make sure you find the best strategy when planning your estate.