Will and trust are the two most common documents in estate planning. However, the term will and trust are often confused but they are really very different. It is important to understand the common and misinterpreted differences between a Will and trust.
Last Will and testament is a will based estate plan holds a detailed list of instructions as to how your property should be shared after you die. If you have minor children, it contains provision for appointing a guardian for your children.
Trust as known as living trust forms the bases of how your estates are shared or given to beneficiaries, what happens to you when you die and who makes certain financial or medical decisions for you when you are mentally incapable.
There are various types of trust, but majorly the irrevocable and revocable living trust.
Revocable living trust
A revocable living trust is a legal entity created to hold the ownership of an individual assets. A revocable living trust covers three phases of the trust maker’s life; mainly while he is alive, possible incapacitation and what happens to his estate after his death.
While the trust maker is alive, the revocable living trust documents ensures that the trust maker own, control and invest in his assets or estate. While also planning for any incapacitation the living trust document should contain a named successor, someone who would step in and take over management of the estates, make medical decisions as well as financial decisions.
An irrevocable living trust
An irrevocable trust is a trust document that files, established and implemented while the trustier is still alive. Just like the name implies, type of trust is irrevocable and are permanent so that the trust once funded is no longer in the possession of the trustier. An irrevocable living trust allows you see that the properties are well transferred to the intended benefactor while you are still alive. Furthermore, it also help you evaluate and supervise the current state of the estate to ensure that their assets are in good hands.
For the sake of permanency of trust, an irrevocable trust ensure the agreement stays the same and unchanged.
Will require probate
When you pass away, your family is faced with the challenge of managing and sharing your assets among themselves. This is usually an emotional and trying time, with a lot of decisions to make. Leaving them without a Will–a valid one–will make things even more difficult for them. Probate in itself is the legal process of determining the validity of a will before its contents are carried out. Not all Wills are valid. For instance, a Will valid in one state may be invalid in another state, and this is why you need a Will attorney.
A will may be contested. Unfortunately, in certain situations, when a decedent will is read, tension and dispute may arise between beneficiaries of the estate. When one or more parties feel that the deceased was forced into signing the will, or that they are being cheated out of their inheritance, such party may issue out a petition of contest of will. Thus, increasing the probate process.
Trust provide for life and death
A will does nothing to plan for mental disability because it doesn’t go into effect until the testator dies. However, provision for disability and guardianship can be written in a revocable living trust. The trustee the grantor has named takes over. The court at this time would not have impose a guardianship.
When a Wills and Trust takes effect
A last will and testament goes into effect after the death of the testator. A living trust goes into effect as soon as it is signed. Although, you can change a Will or your revocable living trust right up until the time of death as long as you remain mentally competent. You need a will and trust attorney to ensure you do the right things.
What property does each plan cover?
A will can only govern the distribution of a property owned in your name at the time death. It cannot address assets that pass directly to a beneficiary by contract, life insurance policy or joint tenancies with right of survivorship. A trust however can be used in disposition of any property it has been funded with.