Estate planning is a must-do when it comes to caring for your children or your finances. Avoiding this important process in your life management can lead to risky or unwanted situations that may affect both your children and your assets. Two tools that most Americans use to direct their wishes are (1) A Last Will and Testament; or (2) A Living Trust. But what are these two tools exactly and what do they do? While Wills and Trusts have some overlap, there are several distinct differences between the two. The Law Offices of Vincent Van Ho are here to help you understand those differences.
What Is a Will?
A Will is a legal document that impacts what happens after your passing. A Will allows you to do such things as name guardians for your children or pets, direct where your assets (material or financial possessions) will go after you pass, and specify any types of final arrangements you may want.
A Will requires that you appoint a personal representative, oftentimes called an Executor or
Executrix, to act on your behalf after your passing. It allows you to designate any beneficiary that will receive assets from your estate and when they will receive them and can appoint guardians for your minor children.
In most cases, upon the passing of the Will’s creator, the Will is submitted to the probate court to ensure that the will is legal and valid. Probate court thereafter enforces and administers the directives listed within the Will through the help of the personal representative. Through probate court, the Will is probated in order to resolve post-death issues such as repayment of outstanding financial liabilities, inheritance rights of potential heirs, or distributing the assets to its beneficiaries.
What Is a Trust?
A Trust, on the other hand, is a legal entity, which is created to control and protect your assets. A trust allows for the management and distribution of your assets both during your lifetime and after death. A Trust may set forth instructions for what you want to happen to your assets and finances if you become mentally or physically ill.
Trusts are a bit more complex than Wills in terms of inception. To create a Trust, you must initially set it up, transfer all of your assets (accounts, properties, houses, cars) into the Trust, and title them in the name of the Trust. Once the trust is created, trustees are then appointed who will be responsible for controlling the assets within the Trust and distributing those Trust assets to its intended beneficiaries.
Which One Should I Choose?
An important distinction between a Will and a Trust is that a Will takes effect after the creator passes away. A Will offers little recourse to the creator’s life events, such as if they were to become incapacitated or unable to make decisions for themselves. As such, Wills are often simpler and more cost-effective to create. If you have children, a Will is a very important instrument to have to ensure your wishes are carried out properly.
On the other hand, a Trust expresses your wishes to be known and controlled according to Trust terms, both during your lifetime and after your pass. One distinct advantage of a Trust is the incorporation of a legal power of attorney. This assists in shifting control of the Trust both if the Trust creator becomes incapacitated or upon their death. The Trustee is contractually bound to ensure the Trust’s assets are transferred in a specified manner. This allows Trusts to circumvent the probate process, keeping your matters private and not public knowledge. Trusts retain confidentiality for the estate, that the probate system would leak if the estate enters probate court.
It is important to settle your affairs earlier in life rather than later. A Will or a Trust can do both. Choose a Will if you have children, want an estate plan that is cheap and effective, and are not too concerned with the costs and public disclosure of probate court.
Choose a Trust if you have multiple assets you own and want to streamline the process of transferring your estate after you die while avoiding a lengthy and costly probate period.
Consult Us for More Information
It’s never too early to state planning your estate. Our office can help you not only better understand the estate planning process but ensure that you and your family are protected in the future. We welcome you to call our office to set up a consultation to prepare your estate plan. We are proud to serve the greater Houston, Texas, and Sacramento, California areas.