What is a Will?
A will is a legal document that explains how your belongings (assets) will be distributed after you pass away. It also allows you to appoint someone to manage your estate and carry out your wishes.
Key Points About a Will:
- What can you include?
- Major assets: Homes, cars, land, or other valuable property.
- Smaller items: Jewelry, heirlooms, or personal keepsakes.
- Cash or funds: Assign specific amounts of money to individuals or charities.
- Special instructions: Provide care plans for dependents or pets.
- Who is involved?
- Executor: A person you choose to ensure your wishes are carried out.
- Heirs/Beneficiaries: The individuals or entities who will receive your assets.
- How flexible is it?
- You can make changes to your will by adding a codicil (amendment).
- You can also replace an existing will by drafting a new one.
- When does it take effect?
- A will becomes active only after your death and goes through a legal process called probate before your assets can be distributed.
What is a Trust?
A trust is another tool for managing and distributing your assets. Unlike a will, it can take effect during your lifetime. You transfer your property into a trust account, and a designated person manages it for your chosen beneficiaries.
Key Points About a Trust:
- What can you include?
- All types of assets: Property, investments, bank accounts, or other valuables.
- Customized instructions: Specify when and how beneficiaries receive their inheritance.
- Who is involved?
- Grantor: The person who creates the trust and transfers their assets into it.
- Trustee: A person or organization that manages the trust and follows the instructions.
- Beneficiaries: The individuals or groups who receive the trust’s assets.
- How flexible is it?
- Revocable Trust: You can modify or cancel it at any time during your life.
- Irrevocable Trust: Once established, it cannot be changed or canceled, but it offers tax and asset protection benefits.
- When does it take effect?
- Immediately upon creation: You don’t have to wait until your death to put it into action.
- Unique Benefits of a Trust:
- Avoids probate, allowing faster distribution of assets.
- Offers privacy since trusts are not part of public court records.
Key Differences Between a Will and a Living Trust
While both tools help with estate planning, they function differently:
- Activation Time: A will takes effect after the creator’s death, while a living trust is active from the moment it is created.
- Probate Process: A will must go through probate, whereas a living trust avoids this process.
- Type of Control: A will dictates post-death asset distribution, while a living trust allows asset management during the creator’s lifetime.
Is a Living Trust Better Than a Will?
The choice between a will and a living trust depends on your estate planning goals and factors such as:
- The size of your estate
- Whether you need access to your assets during your lifetime
- The complexity of your distribution wishes (e.g., the number of heirs or types of assets)
For many, creating a will is the simplest, fastest, and most cost-effective option. However, a living trust may be more suitable for others.
A will might be better if:
- You want to maintain ownership of your assets during your lifetime.
- You need quick and straightforward estate planning.
- You prefer a low-cost planning option.
A living trust might be better if:
- You value privacy in managing your assets.
- You own multiple properties.
- Your estate includes significant wealth.
- You want to protect your assets from creditors.
- You wish to maintain more control over how assets are distributed after your death.
Can You Have Both a Will and a Living Trust?
Yes, it is possible to have both. While a simple will may suffice for some, those who opt for a living trust are often advised to have a will as well. This ensures any assets not included in the trust can be distributed directly to heirs without defaulting to state laws.
What to Consider When Creating a Will
A will is your voice after death, outlining your final wishes for your assets. Dying without a will (intestate) means your assets will be distributed according to state laws.
All instructions in your will are carried out by the executor, under the court’s supervision. Clear and specific instructions are crucial to avoid misinterpretation, which could lead to outcomes against your intent.
Prepare the following when drafting a will:
- Bank account details (checking and savings accounts)
- Retirement and investment account information
- Life insurance policy numbers
- Proof of property ownership (car titles or house deeds)
- Full name and contact details of the executor
- Names and contact details of individuals included in the will
What to Consider When Creating a Living Trust
For many, a will alone is sufficient for estate planning. However, using a living trust can help you avoid probate and allow heirs immediate access to your assets upon death.
Generally, creating a living trust is more expensive than drafting a simple will. While online services can help set up affordable trusts, significant estates should involve an attorney for proper guidance.
You also need to decide how much control you want over the trust. If you prefer to make changes or revoke the trust later, a revocable living trust may be best. For tax benefits and greater asset protection (at the cost of relinquishing control), an irrevocable trust might be the better choice.
Prepare the following when creating a living trust:
- Contact information for the bank where the trust account will be held
- Updated bank account details (checking and savings accounts)
- Retirement and investment account information
- Life insurance policy numbers
- Proof of property ownership (car titles or house deeds)
- Full name and contact details of the trustee
- Names and contact details of individuals named as beneficiaries
Need Help with Wills and Trusts?
Whether you’re considering a will, a trust, or both, contact Yellow Law for expert guidance. We’re here to help you create a tailored plan for your estate and provide peace of mind for the future.
