When you begin estate planning, there are a variety of options that are available in order to plan how your estate will be distributed and may seem very similar, however, they all have distinct benefits. Two main estate planning tools commonly used are wills and/or trusts, but their main features are very different. When determining which tools are right for you, you should first assess what stage of distribution and what assets you wish to control.
There are a number of different types of trust that one may use, depending on what their intentions are. Trusts can be enacted during the grantor’s, also known as the person who made the trust, lifetime, or may take effect upon the death of the grantor. When forming a trust, the grantor seeks to transfer their property to the trust, which is run by a trustee. A trustee can be any number of people, but are neutral third parties who are employed to operate in the best interest of all interested parties involved, including both the grantor and those beneficiaries.
Unlike a will, trusts pass outside of the probate court, and thus avoid the cost of legal fees. A trust allows you to elect at what point in time you will be able to pass certain assets down to your named beneficiaries and can also have specific attainment language, as well as whether you have the power to alter the document or revoke the document upon changed circumstances.
Writing a will can be a much more simple process that will allow your heirs to avoid having a court sort out their rights to your belongings and assume how you sought for your assets to be distributed. While the examination of a will must go through probate court, having a will allows you to appoint someone, known as the executor, to distribute those assets once it passes through probate. The difference between a will and a trust is that a will only takes effect upon your passing, while a trust can be established in one’s lifetime, but is revocable at any time during your lifetime. Additionally, it must pass through probate court and can be subject to a substantial amount of taxes. Many trusts are established within wills.