Did you know that around 55% of Americans over the age of 55 do not have a will in place? Whether you are over or under the age of 55 and trying to ensure that your loved ones are taken care of in the event that you pass away, we are here to share the difference between a will and a trust. We have put together this short guide to share more about wills vs. trusts.
Keep reading to learn the ins and outs of both trusts and wills.
What Is a Will?
This is a legal document that states exactly how your assets need to be managed once you pass away. The person that creates the will is called the testator, and that creator has to be an adult that is sound of mind in order to create the will.
Some things that can be included in a will include distributing pets, bank assets, guardianship of minor kids, and funeral arrangements as well. Keep in mind that every state has its own will rules therefore, you want to speak with a probate lawyer to ensure that the correct person signs the will in order for it to be legally binding.
What Is a Trust?
A trust is when you give someone else authority to handle all of your assets. A trust will usually take effect as soon as it is created. A trust will separate a legal entity and also a fiduciary relationship. The person that creates the trust is called the grantor.
Main Difference
One of the main differences between both a trust and a will is that a trust goes into effect once it is funded and signed where as a will is only effective after the person dies. A will always has to go through a legal process known as probate.
This is a lengthy and long process that a trust does not have to go through even after the grantor dies. Also, a trust can’t be contested but a will can be contested by family members in the event a relative does not agree.
Which One Is Better?
Honestly, everyone should have a will in the event that they pass but a living trust is not always necessary because not everyone owns an estate. Having a trust will be great to streamline an estate transfer process after you pass and it will avoid a period of probate.
For those that have minors, it is imperative to have a will that names a guardian to protect the kids if you were to pass. Keep in mind that a will is usually a lot easier to set up than a trust and also less expensive.
Now You Know the Difference Between a Will and a Trust
We hope that now that you learned the difference between a will and a trust, you can make an informed decision on what to do while you plan your own estate planning.
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