Do you have a decision to make about if you need a trust or a will to distribute your estate? It’s common to have this decision and our attorneys discuss what you need to know to make this important choice.
What Is a Last Will and Testament?
A Last Will and Testament is a legal document that allows the Testator (the person creating the document) to direct the distribution of his/her assets after death. In addition, a Will allows the Testator to appoint an Executor to oversee the administration of his/her estate after death and lets a parent nominate a Guardian for minor children in case a Guardian is ever needed.
What Is a Trust?
A trust is a legal arrangement that allows you to appoint someone (the “Trustee”) to manage and protect assets intended to benefit beneficiaries. A trust is created using a trust agreement and the terms of that agreement govern how the trust is administered. A testamentary trust does not activate until after your death while a living trust activates while you are alive. Trusts can also be revocable or irrevocable.
Differences between a Will and a Trust
Both a Will and a Trust can be used to distribute your estate assets after your death. Beyond that similarity, however, there are several important differences between a Will and a Trust. Those differences include:
- Typically, your Will must be submitted to the court for probate after your death. Therefore, assets distributed via your Will must go through the probate process before they can be distributed to the intended beneficiaries. Conversely, assets held in a trust do not go through probate, allowing them to be distributed shortly after your death.
- Your Will only becomes relevant after your death. A trust agreement, however, can address what happens to you and your assets if you become incapacitated.
- Nomination of Guardian. One thing that a Will offers that a trust does not is the ability to nominate a Guardian for your minor children in case one is ever needed. Ultimately, a court must approve a Guardian; however, the court will give significant weight to someone a parent nominated in a Will.
- Method of distributing assets. Assets distributed via a Will are distributed as a lump sum immediately upon the completion of probate. If you prefer to dole out an inheritance, a trust is a better option. The terms of a trust agreement can stagger the inheritance of a beneficiary which can be especially helpful if the beneficiary is a young adult, has an addiction or mental health issues, or simply tends to be a spendthrift.
- Because a Will is submitted for probate it becomes a matter of public record. That means anyone can view the terms of your Will. A trust, on the other hand, does not go through probate. As such, the terms of a trust agreement usually remain private.
- Asset protection. If one of your goals is to protect assets, a specialized type of trust agreement can help whereas your Will cannot. Certain types of irrevocable trusts can be used to protect assets from creditors, Medicaid, and various other potential threats.
- Special uses. For many people, the most important difference between a Will and a trust is that a trust can often accomplish several objectives at the same time. Along with creating a roadmap for the distribution of estate assets, a trust can also help with things such as probate avoidance, asset protection, special needs planning, and even pet planning.
Contact Our Grand Forks Estate Planning Attorneys
Please join us for an upcoming FREE seminar. If you have additional questions about whether a Will or a trust is right for you or if you need a will or a trust to distribute your estate, contact our Grand Forks estate planning attorneys at German Law by calling 701-738-0060 to schedule an appointment.
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