Recognize That Wills and Trusts Differ in Their Attributes and Implications
A Will and Trusts can both play a part in many estate plans. Both govern assets and their distribution. Often it's best to use both to achieve what you want. This article alerts you to basics about how they differ.
If you're a guardian of someone and need to appoint someone else to take your place at your death, then you may want to do that in a Will since appointing a guardian is usually done in a Will. There may be no legal requirement that a Will be used to name a guardian, but probate courts in your jurisdiction may be more comfortable seeing the appointment in a Will rather than in a trust.
A Will acts upon assets that are titled only in your name, or have no title at all. But to put your assets into a trust, you must make sure you change the legal owner - the title - of the asset to the trust's name. That's how you establish that the trust - and not you - own it. Not making that legal name change for an asset will exclude it from the benefits of having it in the trust. Changing titles of assets can be a hassle, though.
Assets subject to your Will are distributed under the direction of the Probate Court. This is a public and time-consuming process. And, if you hold property subject to a Will in more than one state, having a Will may require you to have multiple court proceedings, called "ancillary probate proceedings," in each jurisdiction. That can also be a hassle. On the other hand, assets that pass through a trust avoid publicity and are generally not subject to probate proceedings - thereby avoiding delay. And trusts take effect immediately at your death.
Trusts can also deal with issues while you're living such as handling your affairs if you become incapacitated. Wills don't go into effect until you die - and then only when the probate judge so rules. So documents - from a trust or otherwise - other than a Will must control problems you may encounter while you're alive.
Simple Wills can be prepared quickly when necessary; even handwritten Wills are valid if prepared correctly. Nevertheless, creating or changing a Will requires that you follow certain formalities. Failing to do so can jeopardize the validity of the Will.
Trusts are often more complicated to draft than a Will. A poorly drafted trust may prevent it from being useful. But you can usually change a trust without the formalities required for altering a Will.
Using a trust may allow you to take advantage of certain tax treatments - like estate tax exemption for the first spouse to die and other strategies. You can have several trusts, each for a specific strategy if necessary. But you can only have one valid Will.
Wills can include testamentary trusts that take effect after death. With such a trust (through its instructions and trustee) you can provide for those who need financial oversight, such as minor children, people with disabilities, and people who have lost the capacity to handle their financial affairs.
These points stress some difference between relying on a trust versus a Will. But realize that the complexity of your estate and your wishes will determine which tools you'll need to best fulfil your intentions. And that can include more than one trust in addition to a Will.
Planning how you and your estate will be taken care of in the best possible way can be complicated. Whenever any document you create implies a legal action to be carried out, the meaning and complications associated with the terms and manner in which that document is constructed becomes critical for a successful result. So it's best to consult with a professional to understand what tools you should use - and how - that are suitable to your situation and wishes.
If you're a guardian of someone and need to appoint someone else to take your place at your death, then you may want to do that in a Will since appointing a guardian is usually done in a Will. There may be no legal requirement that a Will be used to name a guardian, but probate courts in your jurisdiction may be more comfortable seeing the appointment in a Will rather than in a trust.
A Will acts upon assets that are titled only in your name, or have no title at all. But to put your assets into a trust, you must make sure you change the legal owner - the title - of the asset to the trust's name. That's how you establish that the trust - and not you - own it. Not making that legal name change for an asset will exclude it from the benefits of having it in the trust. Changing titles of assets can be a hassle, though.
Assets subject to your Will are distributed under the direction of the Probate Court. This is a public and time-consuming process. And, if you hold property subject to a Will in more than one state, having a Will may require you to have multiple court proceedings, called "ancillary probate proceedings," in each jurisdiction. That can also be a hassle. On the other hand, assets that pass through a trust avoid publicity and are generally not subject to probate proceedings - thereby avoiding delay. And trusts take effect immediately at your death.
Trusts can also deal with issues while you're living such as handling your affairs if you become incapacitated. Wills don't go into effect until you die - and then only when the probate judge so rules. So documents - from a trust or otherwise - other than a Will must control problems you may encounter while you're alive.
Simple Wills can be prepared quickly when necessary; even handwritten Wills are valid if prepared correctly. Nevertheless, creating or changing a Will requires that you follow certain formalities. Failing to do so can jeopardize the validity of the Will.
Trusts are often more complicated to draft than a Will. A poorly drafted trust may prevent it from being useful. But you can usually change a trust without the formalities required for altering a Will.
Using a trust may allow you to take advantage of certain tax treatments - like estate tax exemption for the first spouse to die and other strategies. You can have several trusts, each for a specific strategy if necessary. But you can only have one valid Will.
Wills can include testamentary trusts that take effect after death. With such a trust (through its instructions and trustee) you can provide for those who need financial oversight, such as minor children, people with disabilities, and people who have lost the capacity to handle their financial affairs.
These points stress some difference between relying on a trust versus a Will. But realize that the complexity of your estate and your wishes will determine which tools you'll need to best fulfil your intentions. And that can include more than one trust in addition to a Will.
Planning how you and your estate will be taken care of in the best possible way can be complicated. Whenever any document you create implies a legal action to be carried out, the meaning and complications associated with the terms and manner in which that document is constructed becomes critical for a successful result. So it's best to consult with a professional to understand what tools you should use - and how - that are suitable to your situation and wishes.