When it comes to protecting your loved ones, having both a will and a trust is essential. A will is a legal document that explains how you want your affairs handled and your assets distributed after your death, while a trust is an agreement that allows a third party to maintain and direct the creator's assets in the trust fund. Estate planning can be done by drafting a will or creating a trust, but it's important to understand the differences between them. The main function of wills and trusts is to name the beneficiaries of their property. In a will, you simply describe the property and list who should get it.
When using a trust, you must do so and also transfer ownership to the trust. A living trust is active once it is created and financed, while a will does not take effect until after your death. It's also important to note that there are different types of wills and trusts. A living will is different from a final will and a dumping will. A trust allows the successor trustee to manage trust assets while the grantor is incapacitated and eliminates the need or motivation for a court-appointed guardian to monitor financial interests.
Wealthy individuals and institutions often use irrevocable trusts to protect money from taxes or creditors. Neither wills nor living trusts can help you reduce estate tax, but most assets don't owe estate taxes. For a living trust to work as intended, it must be funded, which means that the various assets housed in the trust property, accounts (investments, retirement, banking), etc., must be transferred into the trust. If an asset is removed from the trust during a refinancing and was never put back in the trust, a transfer will take care of transferring the home back to the trust. Whether you choose to create a will or a trust or both, it's never a bad idea to seek professional advice from financial and legal advisors. For example, if you want to create a trust to help care for minor children until they turn 25, you should consult with an attorney who specializes in estate planning. In conclusion, wills and trusts are two important tools for estate planning.
A will expresses the creator's wishes regarding the distribution of his or her property, while a trust allows a third party to maintain and direct the creator's assets in the trust fund. It's essential to understand the differences between them in order to make sure your loved ones are taken care of after your death.