When creating an estate plan, it is important to select the right elements to meet your specific needs. One of those choices may be whether to use a will or a trust.
In order to make the right choice for you, it is critical that you know what each offers. There are a few important facts and differences to understand about both options.
Designation
A will is the most common thought when people think about an estate plan. That is because the will is a common tool for designating the various wishes of the estate holder. When you have specific assets and items that you want to go to certain parties, a will allows you to make such designations, as well as include any stipulations you would like to incorporate. For instance, a parent may designate a guardian for a child, as well as an inheritance distribution once the child turns 18. It also allows you to designate an executor you trust to make sure your estate distribution goes according to your wishes. There are a few will laws that the courts uphold during the probate process of the estate. The will goes on public record after the courts complete the probate process.
Distribution
For those with large estates, a trust may help to secure the distribution of those assets, and help to limit taxing of them. This may aid in making sure your loved ones receive the greatest possible distribution of your assets. It also keeps your estate affairs private because it does not go on record after distribution. Depending on the type of trust, it may not even have to go through probate. This is because a trust becomes a separate entity from the estate once it is put into effect. As such, parties usually cannot deduct from or redistribute a trust.
Understanding these aspects may help you in making your selection between a will or a trust. It may also be beneficial to consider a few additional factors as noted in previous posts.