Will or Trust – Which is Better for Me?
A trust may be created in a Will (known as a testamentary trust) or as a separate revocable trust (sometimes referred to as a “Living” trust) or as an irrevocable trust. Wills and trusts, along with beneficiary designations, are the three leading methods of passing one person’s property to another person at death. Living Trusts are, for good reasons, becoming increasingly popular. The most common method continues to be the use of a Last Will and Testament. Most clients know what a Will is but many are not as familiar with trusts. Distinguishing these two estate planning tools helps define what they are.
What is a Will?
A Will is a document that, while revocable during a person’s lifetime, becomes effective upon their death and takes on legal significance when the document is “admitted to probate” by a Judge. Trusts work differently. They are relationship-based. A Will might leave $1 million outright to an adult child. A trust might leave the same $1 million to a friend or trust company (as trustee) to hold for the benefit of the child, with instructions on how and when to distribute the money to the child. The person creating the trust has just initiated a relationship that carries with it significant legal requirements. The trustee is legally responsible for the $1 million and owes the adult child (the beneficiary) very strict legal obligations which we call fiduciary duties. Accordingly, the beneficiary has certain legal rights that he can enforce against the trustee to ensure that the trustee acts appropriately, or is held to be accountable if he does not.
A properly created Trust can give your children’s inheritance protection from creditors and future divorcing spouses. Complete the form to request a consultation with an experienced estate planning attorney.
What is an “Estate”?
An estate, in very simple terms, is the property that a person owns when they die. The property might be land, a house, money in the bank, retirement accounts, or the contents of a home or out of state vacation property. The plan for where these and other assets will go when a person dies is commonly referred to as an “estate plan”.