People of many reasons for wanting to engage in an estate plan. Whether it is to protect assets, limit tax liabilities, or ensure their family’s future after their demise, there are multiple instruments in which you can accomplish this. For many people it comes down to two options: a trust or a will. In this article, we will take a look at the difference between them.
Estate Planning
Estate planning is the process of creating legal directives to handle a person’s assets. These directives can be in effect while the person is still alive through trusts or after the person dies through wills.
What Is A Trust?
Trusts are a legal directive that declares what happens to a person’s property and can become active while the person is alive or upon their death. A trustee, an appointed official named to carry out its directives, administers the trust. The trustee can be an individual, such as a lawyer or a financial advisor, or an institution like a bank or law firm.
Is There Only One Way To Initiate A Trust?
Although there a multiple trusts for different situations, all trusts can be classified into two categories:
- Living
- Testamentary
Living Trusts
A living trust is set up while the person is still alive, and the triggering event that causes it to take effect can also happen while the person is still alive. For example, a person might create a trust to bequeath financial support to a grandchild upon that child graduating from college. In this situation, the triggering event, the grandchild graduating from college, may or may not occur while the grandparent is still alive.
Testamentary Trusts
A testamentary trust is a trust that someone can create as part of their will. The triggering event for the trust to become into effect is the death of the person.
Testamentary Trusts Vs. Wills
No, testamentary trusts are not the same thing as a will. As mentioned above, testamentary trusts are trusts whose triggering event is the death of the person creating it and can be created by a will. Above all, remember that it is not the same thing as a will. A will is a document that dictates what is to happen to a person’s property after their demise and appoints a person called an executor to distribute those assets. You can create a trust in your will. In your directives, you can leave instructions to place property in a trust, which the trustee executes.
What Would Someone Agree To Be A Trustee?
Although a person may agree to become a trustee out of loyalty or love for the person creating the trust, trustees are entitled to compensation to administer the trust and ensure the directives are being carried out properly.
In Conclusion: Trust Or Will
Whether you should create a trust or not will require an in-depth look into your assets and the goals you are trying to accomplish. This is a conversation to have with someone who is an expert in estate planning matters and understands the tax liability involved. The lawyers at Dowd Law have years of experience in estate planning and will professionally assist you in meeting your estate planning goals. Contact Dowd Law for a consultation.