Do you know the difference between a will and a trust? Each of these documents can serve a very important purpose in estate planning.
Estate planning documents can help people plan for the future when their loved ones pass away. The problem is that sometimes people aren’t entirely clear about what the different documents are.
With that in mind, this article will take a closer look at the difference between a will and a trust. This article will clear up the confusion so that you can have a better understanding of these documents in the future.
What Is A Will?
A will can be used to help distribute your property after you die. It can also determine who will act as your executor (the person who administers your estate) and how your estate is divided. Here are three main types of wills:
Simple
A Simple Will is a document that outlines a person’s wishes regarding the distribution of their estate after they have passed away. It allows a person to name their beneficiaries, choosing who will receive their assets. It permits a person to name an executor.
Testamentary
Testamentary wills are the most common type of will, in which a person’s wishes are declared in writing, and executed by their signature. It provides a person with the ability to make minor changes to their will after it has already been executed.
Living Will
It provides written instructions to medical professionals about what types of treatments the person would want or not want to be given in the event of a terminal or end-of-life medical situation. This written instruction is enclosed in a will-size envelope type which you can find here.
What Is a Trust?
A trust is an agreement where someone appoints a trustee to hold assets on behalf of others (the beneficiaries). The purpose of a trust is typically to control how your assets will be used after you die. The following are the types of trusts:
- Real Estates
- Holdings of deposits at banks/credit unions
- Investing in securities
- Plans for life insurance
- Business assets and interests
- Vintage items and collectibles
Pros and Cons of Wills and Trusts
Wills are an advantage for those with fewer assets. They are simple to create and generally inexpensive but have no control over how and when assets are given away.
Trusts, on the other hand, are complex legal documents that allow individuals to establish property management either now or upon death. Trusts tend to be more expensive and require more planning than a will, but they do offer more control and privacy.
They also allow for asset management and protection when a person is alive while granting tax advantages and avoiding probate. Trusts are the preferred option for individuals with large and/or complicated assets.
When considering which type of estate planning document best fits your needs, it is important to understand the differences between a will and a trust. A will is a written document specifying what should be done with a person’s assets upon their death.
Learn the Difference Between a Will and a Trust Today
The difference between a will and a trust is an important one to understand. In general, a will determines how a person’s property and assets will be divided after they die. A trust allows its assets to pass to its beneficiaries while still alive.
To understand more about the difference between a will and a trust, contact a professional attorney to determine the best fit for you. Follow these estate planning tips today!
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