Key Differences Between a Will and a Trust
There are many misconceptions regarding estate planning in Kansas and Missouri. Often times, individuals have only a vague idea of what a will and a living trust are and how they operate. Since both involve transferring or protecting assets, they’re often confused. But both of these documents serve different purposes.
What Is a Will?
A will only goes into effect upon your death and essentially does four things:
Gives instructions to the court on how to distribute assets and property upon death
Allows you to choose someone to oversee the distribution of assets
Allows you to choose a guardian to finish raising minor children
If your estate plan includes only a will, your estate will most likely have to go through probate. Probate is a court-supervised process to protect the rights of creditors and beneficiaries and to ensure the orderly and timely transfer of assets. The complexity and duration of probate depends on the size of your estate and state law. Probate is open to public view, which you might want to avoid if you would prefer to keep the details of your estate private.
What Is a Living Trust?
A trust is legal entity that holds property and assets for the beneficiary. A trustee is the individual or entity that controls the assets from the benefit of the beneficiary. Often times, you will serve as the trustee and the beneficiary while you are alive. As the trustee, you remain in complete control of your assets and can move them in and out as you wish.
A living trust enables you to manage your assets both before and after death. When transferring assets through a trust, you have more control over how the assets are transferred to your beneficiaries. You can have the entire amount paid out to your beneficiaries at once or you can stagger payments over the course of time. So long as the trust is properly funded, a trust will avoid the probate process.
What Are Key Differences Between a Will & a Living Trust?
Timing: A trust takes effect immediately and a will does not come into effect until after you die.
Incapacity: Since a will is only effective upon death, it does not allow anyone to manage your assets while you are alive. If a trust is in place, the back-up trustee designated in your trust manages your assets for you and your beneficiaries while you are incapacitated.
Probate: Upon death, wills must be submitted to the probate court for administration. Probate can be a lengthy process, often taking more than a year to sort out. Furthermore, it can be costly. Probate fees are typically around 6% of the value of your assets. If you have a trust in place when you pass away, your trustee will step in to manage and distribute your assets according to the terms of the trust.
Which is preferable will depend on your situation. For more information about the difference between will and trusts or to create a will or trust, contact our experienced attorneys at Stern & Mauck, LLC.