Estate plans can be quite beneficial. However, if people do not fully understand the aspects of the tools available to them, they may not garner the full benefit.
While most people are more familiar with wills being a part of proper estate plans, trusts may be more appropriate than wills in certain instances. It is important to understand the facts about both options.
Wills are a common estate planning tool that people of all walks of life may benefit from. Wills designate the distribution of their assets, as well as make additional determinations. For example, those with small children may include provisions in their wills that name the legal guardians for their children. Individuals may also choose to include different powers of attorney naming someone to make decisions for them if they become unable to make these themselves.
It is important to note that a will must go through the probate process, which includes settling all debts and paying taxes, before the executor is able to distribute the assets according to the will's instructions.
A trust may also be a beneficial estate planning option. As with wills, state law governs trusts, but these tools differ in many ways. Trusts do not go through the probate process. This is because once the trustor places assets into a trust, they become the property of the trust and no longer belong to the estate. A trustee manages the assets in the trust and makes distributions to the beneficiaries per the instructions the trustor lines out in the document.
The size of the estate and the purpose of the tool should play a strong part in determining which one to use. People with smaller estates may fair well with a will. Those with high value assets who want to bypass probate may find a trust to be beneficial.
It is also important to remember that wills are easier to modify than trusts; in some cases, assets cannot be removed from a trust. Therefore, people should make an informed decision when choosing which estate planning tools suit their needs.