LEARN ABOUT THE DIFFERENCE BETWEEN WILLS AND TRUST
You may not know the difference between a will and a trust. As you're estate planning, you should know your options and the proper tools to achieve your asset distribution goals. Wills and trusts are two of the estate planning tools you have at your disposal. Let's discuss what these tools are and how you can use them.
A will is a legal document that specifies how you want your assets distributed when you pass away. A will involves writing down instructions for how to distribute assets. Wills can also specify what type of medical care you'd like to receive if you're no longer able to make decisions and who should raise your underage children in the event of your passing.
Should you pass without having a will in place, the state will distribute your assets, using a set formula for just such a scenario. Most of the time, your spouse and heirs will have priority as the state distributes your assets, but that isn't always the case.
In short, if you have a spouse, children or any significant financial assets, it's a good idea to have a will in place.
It's important to note that you can use a will and trust in conjunction.
A trust allows you to decide how your assets are distributed and lets you create conditions for when a third party will give your beneficiary the stipulated assets. In other words, a third party will handle your assets until your beneficiaries meet your requirements.
One of the most significant benefits of a trust is that your beneficiaries can avoid going through the probate process. This is a lengthy legal process that consists of an executor gathering all the assets to pay any remaining liabilities on the estate and then distributing the rest of the estate to the beneficiaries. This process can take years and may have exorbitant costs associated with it. If you only have a will, there's still a chance your loved ones will wind up in this lengthy court process.
You may want to use a trust if you have any assets that need management, like stocks and bonds, which would still be subject to federal income taxes depending on how these assets are distributed in your will.
Planning your estate and considering the tools you use to care for your loved ones can be an overwhelming decision. If you want to know more about the different ways you can use trusts, wills or a combination of both, contact the office.
This communication is designed to provide accurate and authoritative information on the subjects covered. It is not however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought.