When it comes to determining how you will leave your assets to your heirs, you have a number of options. While most people think of a will as the main tool of estate planning, trusts are another great option. In fact, in many instances, a trust is a better option. Before you decide how to pass on your assets, you need to understand how wills and trusts differ. Here are some basics of both to help you make a decision on which to use.
A Will
Your will is basically a list of your assets and who you want to have those assets after you die. A will also lists who you want as the executor of your estate and, if you have minor children, who should act as their guardian. While a handwritten will may hold up in court, you really want to work with an attorney to draft an official will that’s signed by witnesses. Your will can be changed at any point in your life and any number of times. When you die, a court will validate your will and hear any challenges brought against it. This can take time, and during that time, your heirs will be unable to access any funds or sell any of your assets.
A Trust
A living trust is the most basic type of trust. It creates a separate legal entity and names trustees. These trustees are given the task of managing the trust as you have instructed upon your death. With a trust, the court is not involved at all. Upon your death, the trustees appointed instantly take over. If you have given them access to the assets in the trust upon your death, they can immediately use those assets. If you have placed any conditions upon the assets, though, those conditions must be met in order for anyone to access the trust. For example, some parents place funds in a trust that their children may not access until they turn 21 or graduate from college. You can set any condition you want on the trust.
Which Is Better?
Many people use wills to distribute their estate, but a will isn’t always the best option. Even those who don’t believe they have a large estate may find that a trust is most useful. It depends upon your assets and what your wishes for those assets are. Talking to one of the estate planning experts at Michael F. Kanzer & Associates can give you a better idea of which option is right for you.