Wills and trusts are two options to transfer your assets, but the key difference between these two documents is timing. A will goes into effect only after you die, whereas a trust becomes effective immediately. Let’s run through the basics of these two types of legal documents.
What is a will?
A will is a legal document used to direct the distribution of assets, and, when applicable, to appoint guardians for children. An attorney drafts your will and you can work with them to update it as frequently as needed to ensure it’s still applicable to your current situation.
What happens if you do not have a will?
When a person passes without a will, it’s called dying “intestate.” If this happens, the state distributes the deceased person’s assets according to the state’s laws. This means that the beneficiaries receive prescribed percentages based on the heirs that survived the decedent.
What are the basic components of a will?
A will is made up of several parts, and includes a testator, an executor, and a beneficiary. Here’s a brief explanation of these roles:
Testator: A testator is the person who creates a valid will to be executed upon their death.
Executor: An executor is a person who carries out the wishes of the testator according to the will.
Beneficiary: A beneficiary is a person or persons who inherit the assets and/or estate left by the deceased in the will. A beneficiary can also be an entity (e.g., charity, business, trust).
A will is prepared by the testator and signed in the presence of witnesses. To ensure the will is comprehensive and makes legal sense, it’s best to prepare a will with professional assistance from an attorney.
While a will covers many assets, there are several exceptions, such as life insurance payouts. Because life insurance policies name beneficiaries, the will cannot override that distribution.
A will is subject to the probate court, which takes time and costs money. A will also becomes a part of public record, which could be a privacy issue for people.
What is probate?
Probate is the legal process which distributes a deceased person’s estate as designated in their will or by state law or both.
When a person passes away without an established trust, the probate process typically proceeds as follows:
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