A will and a trust are two documents that each serve their own purpose and will likely be included in your estate plan if they haven’t already been created. An estate plan is a plan for how your assets are going to be transferred after you pass on and should be written up with the help of a Coral Springs, FL estate planning attorney. While both a will and trust address how assets are distributed, there are some differences among the two documents you should be aware of.
In this article, we are going to discuss what a will and trust are along with what makes them different from one another.
What is a will?
A will is “a legal document that lets you tell the world who should receive which of your assets after your death” [Source: CNN Money]. In your will, you can also assign who you would like to serve as a guardian to any dependent children you have. It is very important that you have a will drawn up so that in the event of your death, your assets are distributed according to your wishes and the party you wish to care for your kids is assigned as their guardian. In the event you fail to write up a will, the court shall decide what happens to your assets as well as who will be held responsible for caring for your children, says CNN Money.
Important: You should be aware that anyone you have assigned as a beneficiary on a financial account or insurance policy will be entitled to collect on it despite what your will says as they “take precedence over wills.” Therefore, it is recommended that you keep your will and beneficiaries up to date to ensure they reflect your desires.
What is a trust?
A trust “is a legal entity that lets you put conditions on how certain assets are distributed upon your death.” They can also “help minimize gift and estate taxes.” CNN Money identifies two types of trusts: living trusts and testamentary trusts. “A living trust or an “inter-vivos” trust is set up during the person’s lifetime” while “a testamentary trust is set up in a will and established only after the person’s death when the will goes into effect.” Now, when it comes to a living trust, they can either be “revocable” or “irrevocable.”
When a trust is revocable, it means that you maintain control over all of the assets listed in the trust and you hold the right to “revoke or change the terms of the trust at any time.” An irrevocable trust, on the other hand, means that the assets no longer belong to you and you generally aren’t able to make any changes “without the beneficiary’s consent.” CNN Money identified some other types of trusts that are a little more complicated but may be something you are interested in. Some examples include:
- Generation-skipping trusts. This type of trust, which is also referred to as a “dynasty trust,” allows you to transfer a substantial amount of money tax-free to beneficiaries who are at least two generations your junior – typically your grandchildren.”
- Qualified personal residence trusts. This type of trust “can remove the value of your home or vacation dwelling from your estate and is particularly useful if your home is likely to appreciate in value.”
- Qualified terminable interest property trusts. If you happen to be a “part of a family in which there have been divorces, remarriages, and stepchildren, you may want to direct your assets to particular relatives through a qualified terminable interest property trust.”
Do I really need to hire an estate planning lawyer to help me write my will or set up a trust?
Absolutely. These documents must be written in a way so that they make sense and conform to state laws. In the event there is an error in the document or it goes against state law, your assets may not be distributed according to your wishes. Therefore, if you haven’t already begun to create your estate plan, it is recommended that you contact Express Law to speak with an estate planning lawyer who can help you get started.
Express Law can be reached at:
2900 West Sample Road
Pompano Beach, FL 33073