Estate planning and financial management go hand-in-hand. Each tool can be used to protect your assets and provide for your family when you are gone. Trusts and wills are two options people often use in estate planning to ensure their wishes are honored when they die. Executing the correct legal documents is the only way to guarantee that your family and loved ones will receive the assets you want them to have. Wills and trusts may serve similar purposes but have many differences that you need to know. This article will explain many of the important aspects of both legal documents and discuss the pros and cons of each. We will also discuss strategies to properly distribute your assets and avoid probate if that is your goal.
Trust and Will Basics
Trusts and wills are two important legal documents used to distribute and maintain assets when you die. Many people are more familiar with wills, which are legal instruments that direct the court on how a person would like their assets distributed when they die. Wills must go through the probate process to have effect. Trusts, on the other hand, can be used to manage assets for another person, protect wealth for later generations, provide income and support to children and disabled individuals, and avoid probate. Trusts can be irrevocable or revocable, depending on your needs, and can go into effect immediately. Wills only go into effect after death and when probated by the court. In other words, wills have no effect until the person dies and the will is probated, whereas trusts can be used immediately.
Which is Best for You?
Choosing between a will or a trust may be challenging due to the numerous benefits each one offers. The choice depends on your individual needs and those of your family members. For example, a trust may have an edge if your goal is to avoid probate, keep your assets private, or provide asset protection from lawsuits. It’s important to know that wills must go through a public probate, and are not private once filed. In fact, anyone can go into the Clerk of Court’s office and view the details of your estate after you die and see what property you owned, the value, and who received your assets.
Wills are generally cheaper to draft than trusts but could be more costly in the long run since they subject your assets to a time-consuming and expensive public probate process. While trusts take more time and money to establish, they give you more control over how your assets will be distributed. Trusts also provide your estate with protection against creditors and lawsuits that could drain your estate.
Property Distribution: Wills vs. Trusts
You may be wondering if both legal instruments distribute assets the same. There is a significant difference between how assets are distributed with a will versus a trust. A will must go through the court system and be probated before assets can be distributed. An estate is at the mercy of the court’s schedule as to when it will be completed and the will is filed into the public record forever.
Trusts can transfer assets during your lifetime. The assets in a trust are managed by a trustee with specific instructions regarding assets. Trust asset distribution is faster, less public, and allows for the transfer of property without the court’s supervision in most cases. The trustee has the authority to distribute assets to beneficiaries without going through probate. A trust also keeps estate holdings out of the public eye.
Avoiding Probate: Trusts Outshine Wills
Probate is the process of distributing assets, paying estate debts, and handling estate issues. The court’s involvement in a probate matter depends on the complexity, creditor involvement, and whether or not the matter is contested. Trusts can avoid probate altogether. Assets placed in trust are owned by the trust and not the individual, which means the trust can skip probate completely. Avoiding probate allows beneficiaries to keep more of their inheritance and receive it faster than with a will. Depending on the circumstances, the probate process can take anywhere from a few months to years, and this ties up assets that beneficiaries may desperately need for survival.
Contact an Attorney
Progeny Law Firm assists clients with estate planning in Baton Rouge, LA. Call (225) 465-1090 or contact us online for a free consultation. Sign up for our free educational seminars.
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