The majority of individuals only have a very vague idea of what wills and living trusts are. Due to the fact that they both are designed to protect or transfer assets, they can be a bit confusing. However, wills and living trusts are very different documents with different purposes. Keep reading to learn what both of these documents are and how they are different from one another.
What Are Wills?
A will has four main goals. It names beneficiaries, offers instructions on the distribution of property and assets upon death, names an executor to oversee the distribution of assets, and chooses a guardian for minor children. Wills only go into effect upon the passing of the owner of the document. They only cover property in your name, as opposed to property that is held in a joint tenancy or trust. In order for wills to be successfully carried out, they must go through probate, which is a legal process in which the will is validated by the court, taxes and legal fees are paid, and assets are appraised prior to being distributed.
What Are Living Trusts?
Trusts are legal relationships in which the trustee, which is a company or individual, holds the assets or property for the named beneficiary. A living trust allows the management of your assets prior to and following your death. A living trust, similar to a will, outlines your wishes in regard to your dependents, assets, and heirs. Your assets are placed into a trust that specifically details how they should be distributed when you pass away. If you are the trustee, then you will be permitted to name a successor upon your incapacity or death. As the named trustee, you will be in 100 percent control of the assets, allowing you to move them in and out of the trust as you deem fit.
How Are They Different?
A will and a living trust are different in a few ways. For instance, a will doesn't go into full effect until you pass, whereas a living trust will go into effect as soon as it is officially created.
A benefit to a living trust is that probate can be avoided. The probate process can be particularly lengthy, painful, and sometimes expensive. Another benefit to a living trust is that they offer privacy. A will is a public document, which means that it is open to the public for scrutiny as well as possible protest. A benefit to a will is that it is less expensive in terms of setup fees. This is because living trusts require constant management once they have been successfully created.
If you need help deciding whether a will or living trust is most appropriate for your individual situation, contact a living trust or wills lawyer.