Lots of people get confused about the difference between a will and a trust. In some ways, these two things are quite similar, and both of them will transfer assets of an estate over to an heir. However, these two concepts don’t work in the same way, and it’s going to be best to learn the differences between the two. Keep reading to go over the details about wills, trusts, and how they differ.
Understanding Wills
Wills are legally enforceable documents that are created to ensure that specific assets of an estate go to certain people. Of course, people often have wills drafted to give heirs information about their wishes. This can include wishes for how an estate will be divvied up as well as wishes for how a funeral will play out. A will is meant to help guide the estate planning process along.
You want to make sure that you use your will to pass assets to your children or others that you wish to pass assets to upon your passing. Those who have children who are still minors will want to address who will be named the legal guardian of the children as well. It’s possible to disinherit adult children and spouses using a will, too, but this can be complicated from a legal perspective. Some states allow you to disinherit children or spouses, but others have protections in place that prevent you from being able to do that.
Understanding Trusts
A trust is different from a will because you will be giving a third party the ability to handle assets for the benefit of certain loved ones. This is known as a fiduciary relationship, and many people prefer this method of estate transfer. There are two types of trusts and they are known as living and testamentary. Living trusts can be set up while you’re still alive to give money to heirs while testamentary trusts will see things play out once you’re gone.
Some people choose to set up trusts as a way to help heirs avoid having to go to probate court. Trusts can be more expensive to create and maintain, but it can help people to avoid court fees as well as attorney fees. Some find trusts to be a much easier way to pass assets to the next generation. They do similar things when compared to wills, but they work a lot differently due to not having to play out in probate court.