Estate planning uses many tools to create a strategy that is tax efficient and effective. Trusts and wills are both good ways to plan how to manage the assets in a way that fulfills your purpose. The trust and the will both have a different role to play in the strategy. They can together form the base of any structure that you give to your plan. Your estate planner will give you a good idea of how to use these tools in tandem.
The Role Of A Will In Estate Planning
The main difference between a trust and a will is very basic. The will comes into force once you are dead. This is your last testament and will direct your heirs how your assets are actually distributed. There is a clause that helps you appoint a guardian to carry out your wishes when you are not there. The will encompasses any property that is under your ownership at the time of your death. A Will will not cover any joint tenancy or property that is held in a trust. You can leave a part of your property to vide the will.
The will passes through probate once it comes into effect. The court is in charge of the process that allows the will to be effective in distributing your assets. The court ensures that the process will carry out your wishes in regard to your property. A probate can be lengthy and complicated. It is also an expensive process. The conditions of a probate mandate that the will becomes public knowledge. You have to make the contents of the will public to rule out any contests.
Advance Directives in Estate planning
You can name a guardian for your minor children when you make a will. You can give the funeral arrangements in advance. Additionally, you can leave behind instructions that allow you to make allowances for the taxes your heirs pay when the inheritance tax piles up.
The Role Of Trusts In Estate Planning
The trust is enforced the day you create it. The trust can be revocable or irrevocable. It can be used to hold your assets in your lifetime only. You can create clauses that distribute your property while you are living, or after your death. The revocable trust is in your control and you can modify it at any time.
What Is A Trust
The trust is totally legal and a bank or legal organization can be appointed as the trustee. It holds the title of the property for the persons you have named as your beneficiaries. The trust has two types of beneficiaries in general terms. One set of beneficiaries receives an income from the trust in their lifetime. The second set receives the remaining amount after the first set of beneficiaries pass on.
What Does A Trust Cover?
A trust encompasses any property or tenancy that has been allocated to it. The property has to be placed in the trust to be a part of it. Revocable living trusts can be modified but irrevocable trusts are final in nature. The irrevocable trust means that the property has been entrusted in the beneficiary’s name already and cannot be revoked. A trust is private in nature.
The trust is not within the purview of a probate and so it is not as expensive. The process is instant and the beneficiaries get their due immediately. You can use the trust to plan for tax efficiencies, as inheritance taxes are generally not applicable to the assets held by the trust. You can use this instrument to keep property out of the expensive probate process. Thus, you can save time and money.
Trusts Protect After Death Too
You can add insurance policies in the trust to avoid taxes. Do ensure that the trust is the owner of the policy. Any movable and immovable property can be a part of the trust. The trust should be professionally drafted so the property held by it can seamlessly pass to the beneficiaries when required.
A trust can also contain the provisions for disability. You can draft the guidelines as per your choice. The courts have no jurisdiction over trust and how its disbursal takes place. If you are in any way incapacitated then you can leave detailed specifications on how to handle your medical care too.
All in all, a well drafted will and trust can be the answer to your estate planning woes.