When you hear about estate planning, you most likely hear two terms used often: wills and trusts. A last will and a living trust are both important estate planning documents. But what exactly do they do? And more importantly, which one do you need?
Where wills and trusts overlap and differ
Wills and trusts help you allocate your assets in case anything happens to you. In the case of a last will, it outlines who inherits your assets after death. A living trust can offer similar protection—however, trusts can also safeguard your assets while you are still alive but incapacitated, such as in a coma.
One of the biggest differences between wills and trusts is that you will have to fund your trust account. This means transferring your money or property under the name of the trust. In general, a last will only requires notarizing the document.
Advantages of creating a last will
If one of your goals in setting up an estate plan is to arrange guardianship for children under 18, then a will might fit your needs best. Wills have the additional benefit of having a more straightforward process to make or update than trusts.
Last wills also allow you to:
- Specify how your debts and taxes should be handled
- Exclude specific people from your inheritance
- Give instructions regarding funeral preferences
Advantages of setting up a living trust
If you have significant assets and want to potentially reduce taxes, then a trust might better suit your needs. Specifically, you will want to set up an irrevocable trust account.
Trusts can generally bypass probate as well. This means the beneficiaries you assign may access or receive the assets you left them right away. Moreover, trusts offer more privacy than wills, which become public after probate.
Choosing the right one to safeguard your legacy
Speaking with an estate planning attorney will offer greater clarity on whether a will or trust is best for your situation. They may also help you set up both to better protect your estate and ensure your loved ones have peace of mind after you are gone.