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What’s The Difference Between Will And Trust?

What’s The Difference Between Will And Trust

The telling difference between a will and a trust is that a will is a legal document that transfers property from one individual to another. A living trust is a different type of legal document that can be used in place of and/or in addition to a will. A living trust allows the person who created it to transfer his or her property to other people during his or her lifetime.

 

Although wills and trusts are similar in terms of their purpose, there’s one important distinction that needs to be made. A trust is not an estate planning document, but rather a form of setting up guidelines for your assets when you die.

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What Is A Will?

A will is a legal document that can be used to provide guidance on how your property, assets, and finances are to be distributed after you die. It assists in transferring the ownership of a property after someone’s demise. There are also two different types of wills – probate and holographic will. 

The probate will is signed by witnesses and then it must be sent to the probate court for approval. Holographic will or holographic testamentary disposition is done with just the signature of the person making it so it can be recorded at any time without having to go through any inspection process by anyone.

What Is A Trust?

A trust is a type of fiduciary relationship in which one person, known as a trustor, grants the authority to another party, known as a trustee, to hold title to property or assets for the benefit of a third party, known as a beneficiary.

Trusts are established in order to provide the assets of the trustor with legal protection, to ensure that those assets are distributed in accordance with the wishes of the trustor. This is done to save time and reduce the amount of paperwork required, and in some instances, to avoid or reduce the amount of inheritance or estate taxes. 

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Why a Trust Is Necessary? 

Trusts provide you with complete control over the distribution of your assets, allowing you to plan ahead of time for the future. Estate taxes can be slashed or eliminated entirely through the use of trusts. A trust is a mechanism to designate the distribution of more complex assets after your death. In the event that your spouse or children remarry or the structure of their family changes later in life, you can ensure that they will receive their rightful share of your estate. 

Revocable Trust

A revocable trust is a legal agreement that transfers the grantor’s assets to a trust during his lifetime and subsequently to his heirs or beneficiaries after his death. The grantor may amend or revoke the trust while he is still alive. 

A revocable trust is also a method of assuring that estates will be handed forward to the grantor’s beneficiaries, particularly if the grantor unexpectedly dies or becomes disabled.

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Irrevocable Trust

A trust that can’t be amended or revoked once it’s been signed is known as an irrevocable trust. An irrevocable trust is distinct from a revocable trust, which may be updated or terminated and only becomes irreversible when the trust creator (or grantor) dies.

An irrevocable trust requires the grantor to relinquish control and ownership of the assets entrusted to the trust. This establishes a wholly different tax entity since the grantor does not manage or control the trust and the heirs or beneficiaries do not yet control it.

Comparison Table Of Will And Trust

The requirements of will and trust documents are similar, and yet each serves a distinct purpose in preserving your assets and interests. To help you better understand the differences between a trust and a will, we’ve compiled a comparison chart below. It will help you make the correct decision when it comes to protecting your assets!

Special Situations Involved With Wills

Beneficiary

One of the special situations with wills is when the willer wants to protect their property from people who would want to take advantage of the person after their death.

 

 

The special situations include the following:

  • Guardianship of minor children
  • Disinheritance
  • Death without a will

Guardianship of Minor Children

You should choose a guardian with the best interests of the minor in mind. For example, a guardian appointed by the child, his or her father, or another relative is preferred by the courts. A court must first determine that the parents are incapable or unsuitable to care for the best interests of their child before appointing a non-parent guardian (if the parents are still alive). However, in other areas, parental approval is required before guardianship may be established. Guardianship of minors is considered a suitable alternative when they are taken from their parent’s care and supervision and adoption are neither forthcoming nor feasible. The majority of state legislation allows a minor to pick (or at least express a preference for) who will act as their guardian after they have reached a specific age (fourteen in certain jurisdictions).

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Disinheritance

Disinheritance is the act of preventing someone from inheriting your assets after your death. To ensure that a certain person does not receive anything from the estate, the testator must make efforts to ensure that they are not included. This may be accomplished either by omitting the individual from the will or by incorporating a disinheritance provision. The act of disinheritance can be carried out either on intention or by mistake. A remark like, “I leave nothing to my son, Mike,” would be an example of willful disinheritance. When a will specifies that the testator’s son receives a business but the testator’s daughter receives the bank accounts, this is an example of inadvertent disinheritance. However, in the event that the business was sold and the testator did not revise his will after the sale of the business, the money from the sale of the business would be distributed to the daughter via the bank accounts. Thus, the son would be unintentionally deprived of his father’s inheritance.

Last Will And Testament

Death Without A Will

A person who dies without leaving any will is known as an interstate. To die “intestate” implies an administrator has been appointed by the courts to assemble all financial resources and distribute them according to the wishes of the deceased’s beneficiaries. An intestate estate’s assets are distributed in accordance with state law throughout the probate procedure. An administrator is appointed to manage the estate of a deceased person in accordance with the rules of the probate courts. Like an executor, the administrator receives any legal claims against the estate and settles any outstanding obligations, such as unpaid bills, on behalf of the testator’s estate.

Can You Have Both A Will And A Trust?

You can have both a will and a living trust because they accomplish two distinct goals. Trusts allow you to manage and distribute your assets both while you’re alive and after you’ve passed away. You can designate guardians for your children, appoint a personal representative for your estate, and express your last intentions in a will. The type of will you use in conjunction with a living trust is perhaps more important to know if you want to create the most thorough estate plan possible.

Is One Better Than The Other?

When it comes to estate planning, the use of both wills and trusts isn’t always an either/or proposition. Nonetheless, assets held outside of the trust that is subject to intestacy rules can encounter difficulties if there is no will. Using both methods may be advantageous for larger estates with more intricate needs. A will is a good idea even if most of your assets are kept in ways that avoid probate. It may be less expensive to have a will drawn out than to set up a trust, even if your estate would be subject to probate. Estate administrators and beneficiaries can be named and your remaining assets can be distributed without the 

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need for expensive or contentious court actions when a will is in place. It is important to examine the kind and value of your assets, as well as how old your children are, as well as tax planning factors while deciding on whether to use a will or trust for your estate planning needs. In the end, careful estate planning is necessary to safeguard the value of your 

assets and to provide the advantages you desire for your descendants.

How We Can Help You

If you are dealing with the courts and waiting on your inheritance, we can help. Contact our staff and let us help you get your money sooner. Your budget and bank account will thank you. 

Sources: https://www.investopedia.com/articles/personal-finance/051315/will-vs-trust-difference-between-two.asp#:~:text=Trusts%20are%20frequently%20used%20in%20estate%20planning.,efficient%20than%20transfers%20by%20will

https://www.investopedia.com/terms/i/intestate.asp#:~:text=When%20a%20person%20dies%20without,those%20parties%20deemed%20as%20beneficiaries

https://www.law.cornell.edu/wex/disinheritance#:~:text=Disinheritance%20means%20to%20prevent%20someone,inheriting%20anything%20from%20the%20property

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Legal Disclaimer: Please note that Inheritance Advanced is not a lender. Inheritance advance does not provide probate loans, inheritance loans, or estate loans, rather, an advance on a portion of proceeds signed over to Inheritance Advanced. Inheritance Advanced is also not a probate attorney and any information in this article should not be misconstrued as legal advice. We recommend that you seek the advice of an attorney, CPA, and tax attorney regarding any decisions pertaining to your probate.

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