Trusts and wills are both valuable estate planning tools used to transfer assets to heirs and beneficiaries. The primary function of these documents is to ensure your wishes are carried out in the event of incapacitation or death. Trusts and wills outline the terms in which your property is distributed before and after your death. Although trusts and wills share some similarities, they both serve different purposes.
The most notable difference is that a living trust becomes active once signed and funded, while a will takes effect after a person’s death. Read on to discover other differences between trusts and wills and which one is the most suitable for your estate planning needs.
Creating a Trust
A trust is a special type of legal arrangement that lets you transfer assets during your lifetime and after death. It allows the creator of the trust, otherwise known as the grantor, to hold wealth for their own benefits or for another person or group (beneficiaries). This document also grants another party, a successor trustee, the power to manage the trust should the grantor become incapacitated or dies.
The trustee, in this case, can be an individual, an independent institution like a bank, or a professional fiduciary. A trust only becomes valid and legally binding when the person signing it clearly identifies the grantor, the trustee, and the beneficiaries. With a valid trust, you, the grantor, can have full control and create specific guidelines and conditions to be followed when distributing your assets. For example, if the grantor wants their income to cater to a child with a disability, they can fulfill these wishes through a trust.
Properly designed trusts can help in asset protection, special needs planning, and tax planning. There are various types of trusts, including revocable and irrevocable trusts, that you can establish based on the goals of your estate plan.
Benefits of a Trust
- Asset protection: A trust can assist in protecting your wealth from creditors and help you prepare for long-term care.
- Protects your privacy: This document provides a private arrangement between the parties involved and does not enter the public record. This means that no one will access it later through public records.
- Allows for flexibility: The beauty of creating trust is that you can amend its terms to suit your life’s changing circumstances. Whether you want to add a new beneficiary or change the current terms, you can adapt your estate plan according to your needs.
- Avoid probate: Unlike wills, where assets go through probate for authenticity, trusts avoid the probate process. Probate is a judicial procedure of administering a decedent’s estate.
Creating a Will
A will is a legal document that spells out a person’s wishes regarding property distribution after their death. Unlike a trust where you can appoint a trustee to handle your assets, in a will, you get to manage your estate until death. The will authorizes a personal representative called an executor to carry on the provisions of the will and accomplish your wishes.
A will should contain certain elements, such as the names of beneficiaries inheriting the assets, guardianship for minor children, the designation of an executor, instructions for execution, and when the heirs will receive their inheritance. In addition, your will should identify the assets you wish to distribute to your heirs. However, you can only include assets held under your name upon your death. This is why it is important to update your will as circumstances change.
Upon death, the executor will file the will at the Clerk of Court’s office to initiate probate proceedings. Once the probate process begins, the court will review the will for validity and supervise the entire estate administration process. The court will also ensure that the personal administrator is distributing the estate appropriately and resolve any claims against the estate.
Benefits of a Will
Like trusts, wills also have their own benefits, including the following:
- Creating a will provides financial security for those who matter most to you. It gives you and those close to you peace of mind knowing that your loved ones will be cared for after you are gone.
- A will allows you to choose who will be responsible for handling your affairs upon your death.
- Having a valid will in place can help reduce stress and chances of disputes for your family, beneficiaries, and friends when you die.
- A will eliminates the need for a court process and quickens the overall estate administration process.
- With a will, you can appoint a guardian for minor children if they are not identified in another document.
- A will also lets you specify your funeral or memorial plans.
- This document further allows you to create a testamentary trust to keep your assets for another beneficiary, including children with special needs.
Hiring Indianapolis Estate Planning Attorney
Trusts and wills are essential estate planning documents that can help ensure your assets are protected and will be smoothly transferred to your heirs. Depending on your estate planning goals and needs, you can choose to create one or both.
While it is possible to draft these documents yourself, we recommend consulting an attorney to avoid potential pitfalls and ensure your wishes are carried out and your interests are protected. A lawyer can also guide you through the estate planning process to help you accomplish your objectives.
Estate planning attorneys at Applegate & Dillman Elder Law have extensive experience in estate planning matters and can help you navigate the process of preparing your will, trust, or both. We work with clients across Indianapolis, IN, to establish and accomplish their estate planning goals in the easiest possible way.Need help creating a will or trust in Indianapolis? Please schedule a consultation today with our Indianapolis estate planning attorneys. You can also contact us directly at (317) 492-9569 for inquiries.