Did you know that only 33% of Americans have a will, trust, or any end-of-life document? It’s one of those tasks we know we must do, but it only sometimes gets priority. Trusts and will sound similar, but they’re pretty different.
While it’s true that having a will is an integral part of finalizing your estate, other legal documents can also help you. But before you do, you want to understand the differences between trusts and wills. Understanding the differences between trust and a will can help you be prepared when the time comes.
Read below to learn more about the difference between a trust and a will today.
Essential Elements of a Trust vs a Will
A trust and a will are two documents designed to care for a person’s affairs after passing. However, there are some essential differences between the two papers. A will mainly serves to lay out instructions detailing how a person wants their estate to be distributed after they pass away.
On the other hand, trusts are used to set aside assets and transfer them to those named by the trust’s creator. To create a trust, certain formalities must be observed, such as using a particular language, signing in the presence of witnesses, and complying with the provisions of the trust document itself.
Tax Implications of Trusts and Wills
The main difference between a trust and a will regarding tax implications is the timing of the tax burden. With a trust, the trust itself is responsible for paying any income tax due on the income it generates. Meanwhile, a will passes the responsibility of paying income tax to whoever inherits the estate.
On the flip side, the trust may be responsible for paying the estate tax on the amount that accumulates in the trust. A will does not have to pay any estate tax. Make sure to contact the right trust attorneys for your case to smoothen out your needs.
In What Situations is a Trust or a Will More Appropriate?
Situations with your estate planning process can occur, so you need to know what’s more appropriate. For instance, when someone has ownership of assets over a long time, trusts may effectively preserve assets that can provide income to beneficiaries.
Knowing specific types of trusts can also support higher-needs beneficiaries, allowing them to receive their inheritance at intervals. Alternatively, if someone wishes to provide a lump sum of resources upon their passing or establish a guardianship or trusteeship of their estate, a will can be used instead.
Flexibility and Revocability of a Trust and a Will
The principal difference between a trust and a will lies in flexibility and revocability. A will is a legal document that becomes effective only upon the testator’s death and is irrevocable.
Once the will is executed, it cannot be changed or modified. On the other hand, a trust may be created during the testator’s lifetime. It can remain revocable until the creator’s death.
Learn the Main Difference Between a Trust and a Will Today
The role of trust vs will is an integral part in managing your assets. Writing a will effectively handle assets upon your death and create a clear line of responsibility and authority upon your passing.
Trusts can provide legal protection and tax advantages while in effect or upon your death. Contact an estate lawyer to discuss the difference between a trust and a will if you want to learn more options.
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