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Wills vs. Trusts: In Plain English

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Everyone has heard of wills and trusts. Most articles written on these topics, however, often presume that everyone knows the basics of these important documents. But, in reality, many of us do not – and with good reason – as they are rooted in complicated, centuries-old law.

If you are not an estate planning attorney, these concepts tend to remain merely that – concepts. So, if you are “fuzzy” about wills and trusts, know that you are not alone. After we show you the difference between these two documents, we will tell you why a trust is the better choice.

Wills vs. Trusts: Defined

Let us take a minute and define both “will” and “trust”:

Will:

A will is a written document  signed and witnessed. A will is considered a “death” document as it only goes into effect when you die.

Trust:

A trust (specifically, a revocable living trust) is a formal relationship where you (the trustmaker) name a trusted individual (trustee) to manage accounts and property for your benefit and the benefit of others(beneficiaries). When people talk about a “trust” they are usually referring to the legal document that puts this relationship inwriting, and is effective during your lifetime, during any period of disability, and after death. Because the trust is effective during your lifetime and you can change it, it is referred to as a “living” document.

The Probate Process: A Key Element in Deciding Between a Will and Trust

One key element in deciding between a will and a trust is understanding the probate process. The term “probate” –which literally means “proving” – refers to the process wherein a deceased person’s will must be determined to be valid, outstanding legitimate debts paid, and the accounts and property transferred to the beneficiaries.

The downside is that probate can take a long time – even years – it is expensive and time consuming, and the entire process is completely public, meaning your nosey neighbor Nancy and evil predator Paul both know exactly who got what and how to contact the recipients. In virtually all cases, the only upside of probate is that once the probate has been officially closed, creditor claims are permanently cut off.

Probate Guaranteed. If you use a will as your primary estate planning tool, and you own property in your individual name, probate is guaranteed.

Probate Avoided. If you use a trust as your primary estate planning tool, the accounts and property are owned by the trust, not you, avoiding probate – saving your family time and money.

a young family sits at a table and speaks to their lawyer. the father is holding a pen and pointing at documents. the group is smiliing.

What do I do with this information?

Now that you know the various terms, it is important to have a plan for yourself and use the terms in the right legal context to ensure that your plans and wishes are honored. Many do-it-yourself estate and trust documents do not accurately define and distinguish the different groups, and if you are not aware of the distinctions, you may believe that you are protecting someone when you are not.

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