Estate planning is a vital process that enables individuals to secure their assets and ensure the smooth distribution of their wealth to beneficiaries after their passing.
Wills and trusts are two primary tools in estate planning, each serving distinct purposes.
Understanding the differences between a will and a trust can help you make informed decisions about how to best manage your assets and provide for your loved ones.
Wills
A will, often referred to as a “last will and testament,” is a legal document that outlines your wishes for the distribution of your assets and the handling of your affairs after your death. It is a foundational part of estate planning and serves as a declaration of your intentions.
A will dictates how your assets will be distributed after your death. It can cover a wide range of properties, including real estate, personal belongings and financial accounts.
A will allows you to designate guardians for your minor children. It allows you to specify who will be responsible for their care and upbringing in the event of your passing.
Wills typically go through a legal process known as probate after your death. This process involves validating the will, identifying assets, paying debts and distributing assets to beneficiaries. Probate can be time-consuming and may involve court proceedings.
Wills become part of the public record upon entering the probate process.
Trusts
A trust is a legal entity that holds and manages assets for the benefit of specified individuals or entities, known as beneficiaries. Trusts are versatile tools that offer various advantages beyond what a will can provide.
Trusts allow you to transfer ownership of assets to the trust, which is managed by a trustee (often yourself during your lifetime). You can specify how and when the assets are distributed to beneficiaries, which can extend beyond your lifetime.
One of the key advantages of trusts is that they can help bypass the probate process. Assets held in a trust generally do not go through probate, leading to faster and more private asset
distribution.
Unlike wills, trusts offer a greater degree of privacy. Trusts are not usually made public, meaning the terms, assets and beneficiaries remain confidential.
Trusts provide more control and flexibility in asset distribution. You can create revocable or irrevocable trusts, specify conditions for distributions (such as age milestones) and even include instructions for managing assets if you become incapacitated.
Trusts can be more complex to set up and manage compared to wills. They often involve legal and administrative costs associated with creation, management and potential amendments.
Both wills and trusts play crucial roles in estate planning, but they serve different purposes and come with distinct benefits.
Wills are fundamental documents that guide asset distribution and other wishes, while trusts provide more control, privacy and the ability to avoid probate.
Professional advice
The choice between a will and a trust depends on your individual circumstances, goals and the level of control you wish to maintain over your assets both during your lifetime and after your passing. Consulting with legal and financial professionals can help you make an informed decision that aligns with your estate planning objectives.
EDITOR’S NOTE — Joey Hocutt is a licensed attorney and serves as a ministry engagement officer with The Baptist Foundation of Alabama. Alabama Baptists who need help with their estate plans or churches considering a legacy ministry for their members can get more information at tbfa.org.
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