When deciding on an estate plan, many of our clients in Raleigh and Durham, NC aren’t too familiar with the differences between wills and trusts, so it’s difficult to decide which might be best for their specific situation. How our estate is dispersed is part of the legacy we leave our loved ones, so it’s important to know which method works in which situations.
Here are three of the main differences between wills and trusts:
- When they can be used: A will is a document that does not go into effect until the originator dies. Upon death, the originator’s assets become their “estate”, which usually goes to probate where the estate is generally divided according to the terms of the will at the end of the probate process. The probate process can take over a year to complete. A trust is a legal entity in which an originator can place and seamlessly transfer to the trustees of the trust who can then disburse the assets according to the originator’s wishes. Subject to the terms of the trust, assets can often be distributed more quickly and easily than assets that have to first go through probate.
- What they cover: Wills and trusts both cover the distribution of property and assets but trusts can not provide for guardianship of children. A will is needed to designate your preferences for guardianship of minors. Still, trusts do allow stipulations to ensure its assets are used in the way that the originator intended. For example, an originator may state that funds within the trust may be used only for the higher education of a minor, or only so much may be withdrawn per year by a specific person.
- Ownership of the estate: In a trust, ownership of the assets is transferred to the entity of the trust where a trustee that the originator has appointed controls how the assets are disbursed, in accordance with the terms of the trust. In a will, ownership of the assets is transferred directly to the person that the originator directs, usually without any conditions or safeguards.
A person’s estate plan may include both a will and a trust to ensure that their assets are dispersed as they wish. Whether a will, a trust, or a combination of both, Thornton Law Firm specializes in helping create the right estate plans for each unique person. Contact us to see which tools are best for your estate plan.