Many people have heard of wills and trusts, but they might not be aware of the differences between these two useful estate planning tools. A knowledgeable estate planning lawyer can discuss wills, trusts, and the differences between them to help you create an estate plan that suits your needs.
What Is a Will?
A will is a legal document that directs how your property should be disposed at your death. You give instructions in the will about how to handle your property, and you name an executor to carry out these instructions. You can also name the preferred guardian for your minor children should you pass away while they are still minors.
A Will only concerns property that is part of your “probate estate.” If you have property that passes via a beneficiary designation form (like a retirement account or life insurance policy) or you own property as joint tenants with another person, that property will not be controlled by your will.
What Is a Living Trust?
A living trust is a document that gives instructions about how to manage property for the benefit of the beneficiaries you name. It can immediately go into effect and provide instructions on how to manage your property if you become incapacitated.
As with a will, you give instructions about how you want a trusted person to handle property upon your death. However, these instructions tend to be a lot more detailed. For example, the trust can hold real property and state that your beneficiary can live on the property, rent it out, or sell it. You can provide discretionary distributions of money or property to your beneficiaries at certain ages or when a need arises. During your lifetime, you could remain in complete control of your assets and could move them in and out of the trust as you see fit.
Differences Between a Living Trust and a Will
Many people wonder, “What is the difference between a will and a trust?” However, there are many differences between wills and trusts, including:
- Property controlled – Wills only concern the property that is part of your probate estate. Trusts control any property that you transfer to the trust.
- Effective date – A Will becomes effective upon your death. A Trust can become effective on the date you sign it.
- Privacy – Wills require probate, a court-supervised process. Trusts can be privately administered.
- Method of disposition – Wills provide your beneficiaries with your property outright. Trusts can dictate how your beneficiaries can use those assets.
- Access to Assets – A trust bypasses the probate process and the assets may be transferred to the beneficiaries immediately, without the need of a judicial proceeding. A will must be probated in court, and the assets can only be transferred to the beneficiaries when the court has confirmed the will’s validity with the issuance of letters testamentary to an executor.
Contact an Estate Planning Lawyer Today
In order to determine whether to use a trust, will, or both, contact an experienced estate planning lawyer at Chaves Perlowitz Luftig, LLP. We can discuss the pros and cons of each option, your needs, whether you should use both a will and trust, and the optimal plan for your estate.
Chaves Perlowitz Luftig LLP is one of the most highly regarded real estate and estate planning firms in New York City. Our team of top-rated real estate attorneys and estate planning lawyers have extensive knowledge, resources, and connections to help you achieve your goals and plan for the future.