Will vs. Trust: What Is the Difference?
Category: Estates | Inheritances
Will vs. Trust: An Overview
Wills and trusts are both estate-planning tools that can help ensure your assets are protected and bequeathed to your heirs (besides your spouse, which is almost always assured by law as a given).
This is because the unlimited marital deduction provisions in the United States estate and gift tax laws allow the passing of wealth to a surviving spouse without incurring gift or estate tax liabilities.
However, the transfer process becomes much more involved when wealth is passed to a subsequent generation. It is possible to have both a will and a trust.
A will is a written document expressing a deceased person’s wishes, from naming guardians of minor children to bequeathing objects and cash assets to friends, relatives, or charities. A will becomes active only after one’s death.
A trust is active the day you create it, and a grantor may list the distribution of assets before their death in it, unlike a will. There are irrevocable trusts, often created for tax purposes, which cannot be altered after their creation, and living trusts, which can be changed by the grantor.
All wills must go through a legal process called probate, by which an authorized court administrator examines them. This process can be lengthy and potentially contentious if family members contest the will. Trusts are not required to go through probate when the grantor dies, and they cannot be contested.
For this article, we will examine how these estate-planning tools can provide for your heirs, including:
- Whether you need a will, a trust, or both
- The different types of trusts
- The advantages and disadvantages of wills and trusts
See the original article here: https://www.investopedia.com/articles/personal-finance/051315/will-vs-trust-difference-between-two.asp
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