Both trusts and last wills can play a central role in an estate plan. Some people use both documents, and other people pick between the two.
In order to determine if a trust or a last will better suits your estate-planning needs, you have to understand the different benefits of both options. Learning about the differences between a trust and last will can make it easier to select the tool that will work best for your needs.
When does it take effect?
One of the most notable differences between a trust and a last will is when the document takes effect. A last will only has legal authority after you die. In the event that you wind up in a coma for years, a last will does not take effect.
A trust, on the other hand, can begin to offer you protection as soon as you create and fund it. There are different kinds of trusts, some of which you could fund at the time of your death with the proceeds from a life insurance policy. Other forms of trust can hold your major assets for you while you are still alive.
One of the benefits of using a trust to hold the title for your home, for example, is to protect it from creditors. Putting property in a trust will also make it easier for you to qualify for Medicaid later.
Who has authority over the assets involved?
With a last will, as soon as the executor transfers property to individual beneficiaries, the estate loses all control over the utilization of those assets. In a trust, however, family members don’t receive everything immediately.
You have the option of restricting how much they can withdraw at one time or even limiting the purposes that they use their inheritance for.
Do they require the involvement of the probate courts?
Although some people try to plan their estate to avoid probate, that isn’t always possible. Even if you have a last will, your estate may have to go through probate court before your loved ones can access the property you leave for them.
Assets in a trust typically bypass the probate process, which can allow for more rapid or seamless access. Exploring your needs and legacy wishes can give you a better idea of which of these options might be better for you or if a combination of the two will best serve your interests.