Will or Trust? How do you know which is right for you? Most people initially focus on the desire to decide how their estate assets are distributed after they are gone when they contemplate the creation of an estate plan. That typically means deciding whether to use a Last Will and Testament or a trust agreement to distribute assets. With that in mind, the Coral Gables estate planning attorneys at Stivers Law discuss how to decide which of these options are right for you.
What Is a Last Will and Testament?
A Last Will and Testament is a legal document that allows the Testator (the person creating the document) to direct the distribution of his/her assets after death. In addition, a Will allows the Testator to appoint an Executor to oversee the administration of his/her estate after death and lets a parent nominate a Guardian for minor children in case a Guardian is ever needed.
What Is a Trust?
A trust is a legal arrangement that allows you to appoint someone (the “Trustee”) to manage and protect assets intended to benefit beneficiaries. A trust is created using a trust agreement and the terms of that agreement govern how the trust is administered. A testamentary trust does not activate until after your death while a living trust activates while you are alive. Trusts can also be revocable or irrevocable.
Will or Trust: What Are the Differences?
Both a Will and a trust can be used to distribute your estate assets after your death. Beyond that similarity, however, there are several important differences between the two. Those differences include:
- Probate. Typically, your Will must be submitted to the court for probate after your death. Therefore, assets distributed via your Will must go through the probate process before they can be distributed to the intended beneficiaries. Conversely, assets held in a trust do not go through probate, allowing them to be distributed shortly after your death.
- Incapacity. Your Will only becomes relevant after your death. A trust agreement, however, can address what happens to you and your assets if you become incapacitated.
- Nomination of Guardian. One thing that a Will offers that a trust does not is the ability to nominate a Guardian for your minor children in case one is ever needed. Ultimately, a court must approve a Guardian; however, the court will give significant weight to someone a parent nominated in a Will.
- Method of distributing assets. Assets distributed via a Will are distributed as a lump sum immediately upon the completion of probate. If you prefer to dole out an inheritance, a trust is a better option. The terms of this type of agreement can stagger the inheritance of a beneficiary which can be especially helpful if the beneficiary is a young adult, has an addiction or mental health issues, or simply tends to be a spendthrift.
- Privacy. Because a Will is submitted for probate it becomes a matter of public record. That means anyone can view the terms of your Will. A trust, on the other hand, does not go through probate. As such, the terms of this type of agreement usually remains private.
- Asset protection. If one of your goals is to protect assets, a specialized type of trusts can help whereas your Will cannot. Certain types of irrevocable trusts can be used to protect assets from creditors, Medicaid, and various other potential threats.
- Special uses. For many people, the most important difference between a Will and a trust is that a trust can often accomplish several objectives at the same time. Along with creating a roadmap for the distribution of estate assets, a trust can also help with things such as probate avoidance, asset protection, special needs planning, and even pet planning.
Contact Our Coral Gables Estate Planning Attorneys
For more information, please join us for an upcoming FREE webinar or review our estate planning page to learn more about how we can help you. If you have additional questions or concerns about creating your estate plan, contact the experienced Coral Gables estate planning attorneys at Stivers Law by calling (305) 456-3255 to schedule an appointment.
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