A will is a legal document that provides instructions for distributing property after death. It also can name guardians for minor children and executors to manage the estate. A trust, on the other hand, is a complex legal arrangement that transfers ownership of assets to a third party who can then distribute those assets to beneficiaries in accordance with your instructions. While a will may suffice for some, many people with substantial wealth or high-value assets benefit from a trust. The question of whether a will or trust is the best option for you comes down to a balance between simplicity and control.
A trust is often used for people who want to minimize probate costs, reduce the chance of disputes among heirs and beneficiaries, or provide tax benefits. It is also a tool for families with special needs, especially if they are on public assistance programs such as Supplemental Security Income (SSI). A trust can be set up either during life or in a will to begin distributing assets while you are still alive. It can also be used to hold and distribute real estate and other assets that would otherwise be subject to the statutory rules on inheritance in your state.
Almost everyone should have a will. This is because a will allows you to make clear and comprehensive plans that are binding on your family and heirs. It can also help you avoid the possibility of lawsuits after your death. It is important to talk with your lawyer about what should be included in your will.
Some people use a will to set up trusts for specific types of assets, such as a vacation property, a family home or treasured heirlooms. They may also want to include disinheritance provisions based on state laws. However, it is critical that any wills and trusts be properly established and maintained to ensure their effectiveness after your death.
In addition to distributing assets after your death, a trust can be used to provide for a disabled person in a way that protects the beneficiary’s eligibility for federal and state public assistance programs. It can also be used to transfer life insurance policies and to protect those proceeds from the creditors of the beneficiary or the claims of any ex-spouses.
A trust is usually more expensive to prepare than a will, but it can pay for itself in reduced legal fees and taxes. In addition, a well-drafted trust can eliminate the need for costly probate and reduce legal disputes between family members after your death.