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What's the Difference Between a Will and a Trust?

Basic estate planning brings up a lot of questions. Most beginners are not aware that there is a difference between a will and a living trust. Each of these estate administration options provides its own special benefits; today's blog post will help you decide which you should include in your probate plan.

First, it is important to note that wills only take effect after you die. These legally binding documents allow you to name someone to distribute your property after your death. This person is known as an executor. That person settles debt claims from creditors and oversees the distribution of your holdings. Wills do not control funds that pass automatically to beneficiaries, such as retirement accounts, pensions and other assets.

Wills are necessary even if you have a trust, largely because they allow the creator to settle legal claims. Probate administrators can help transfer assets to a trust if they were not properly moved before the creator's death.

Trusts are valuable to estate plans, as well, because they help owners transfer assets such as homes, rentals and nonretirement brokerage accounts. Trusts are not only applicable after the creator dies; rather, they go into effect immediately. A trust will help the owner avoid the need for a court-supervised probate process after death, largely because accommodations have already been made in advance. Trusts can also help alleviate estate tax burdens, depending on their structure and value.

Why would someone want a will, then, instead of a trust? People with less than $150,000 in probate assets should use the will plan. In that case, the assets can be transferred using an affidavit procedure that is faster and less expensive than creating a trust. Trust estates are generally beneficial for those with larger financial holdings. They are also useful for people with minors listed as beneficiaries or heirs who may be incapacitated. People with questions about their trusts or wills should consult a qualified attorney for assistance.

Source: Lake County News, "Estate planning: What is the difference between a trust and a will?" Dennis Fordham, March 30, 2013

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