We all have heard the words will or trust. Even though they are common words, they also have different meanings. While pondering estate planning, one might encounter two standard techniques of transferring possessions and assets to the heirs – trusts and wills.
Will and trust help in planning a person’s future. Law and estate planning isn’t everyone’s cup of tea. Will and trust create confusion because some people think they are identical or similar. However, they are not, and we will dive deep into that.
What Is a Will?
First, let’s discuss Will. According to the Missouri Statutes, a will is a legal document that specifies the inheritance of a person’s assets and properties. A will can include instructions for issues requiring action after the person’s passing and a guide to designate an executor on that person’s behalf. Also, make an appointment of donors for their minor children and plan the individual’s funeral and burial.
When someone passes away, the court checks their will for it to be legitimate, their debts collected, and their assets’ inheritors. This process is called probate. The probate process is public and executed by the executor you appoint.
There are two different kinds of wills. One is called a last will or testament, and the other is called a living will. A living will acts as a medical treatment guideline if you cannot convey your demands, whereas a will gives instructions regarding your assets’ distribution after passing. Living and last wills are similar but have a significant distinction. Living will concern your medical care, while last will deal with your property and financial assets. It is usually best to have a last will and a living will. It is because these two documents serve different purposes, and having both ensures the successful execution of wishes even if you become incapacitated before you pass away.
Pros of a Will
- It supports a loved one by transferring your ownership to them.
- It is often free or sometimes comes at an affordable cost.
- It is relatively easy to change as compared to trust documentation.
Cons of a Will
- People can view what happens during the probate process and what is in a will.
- The property distribution stated in the will occurs after the probate procedure and may get prolonged.
- Estate taxes are mandatory to pay no matter what.
What Is a Trust?
Trust is a legal agreement that helps transfer assets from the owner as a trustor or grantor to a trustee. Trusts become effective when assets are transferred to them, unlike wills, which only take effect after death. Trusts establish guidelines for how the trustee should manage the assets, how somebody could make distributions to appoint the recipient, and how to distribute the assets.
According to the St. Louis trusts attorneys at TdD Law, there are two types of trust. One is a revocable trust, in which changes can happen while the person is alive, like changing assets or terms. The other one is irrevocable trust, meaning there can not be any changes. It is a fixed agreement.
Unlike the will process, the trust process does not go through the probate process. Assets in a trust are usually distributed based on the document’s terms without needing the interference of a probate court.
Pros of a Trust
- When probate is unnecessary, the trust is private and not shared with the public.
- If the trust is irrevocable, it can protect your assets from the creditors, unlike in a will, where the creditors can get ownership even after the owner’s death.
- Another benefit of irrevocable trust is that it minimizes the estate tax, or in some cases, it falls onto your taxable estate.
Cons of a Trust
- First, the big drawback is that it’s expensive to create trust, unlike will, which is sometimes accessible or affordable.
- Legal need is still required because it involves the transfer of properties.
- As stated above, if the trust is irrevocable, then the change becomes impossible.
Trust and will are both linked together when it comes to estate terms. This creates confusion for some, thinking they are similar or identical, which is different. They are different and will mainly focus on what happened after the owner’s death. At the same time, trust focuses on transferring ownership when the person is alive.
