To ensure that your assets are distributed to your loved ones when you die, you would want to name them as the beneficiaries to your estate. In order to do so, you can choose between writing a will or establishing a trust.
Although these two instruments fulfil the same purpose, they function differently so it is best to know which one will work best for your needs.
What is a will?
A will is a document that states how you want your assets to be distributed upon your passing. It allows you to choose an executor to oversee the distribution of your property and gives you the option to name a guardian for your minor children.
What is a living trust?
A trust is a legal arrangement wherein which a person or an institution, referred to as the trustee, holds the property or assets for the beneficiary. There are several reasons for setting up a trust. Because this is effective upon creation, a living trust enables you to manage your assets both before and after death.
Living trust fund vs will
Should you write a will or establish a trust?
With distinct characteristics for each one, the decision to choose a living trust fund vs will can be difficult.
Consider the following factors when you are deciding whether to create a will or a trust:
1. Creation and administration
If at a later date, you would like to make changes, you can easily amend your will by adding a codicil or simply writing a new one.
Also, technology has made will writing more convenient and accessible. A simple online search of will provide you with various results that can include a that would help you write a will on your own.
On the other hand, trusts are more administratively burdensome because they require the actual transfer of the assets to your trustee. They are also more expensive to set up because they require active management after being established.
2. Scope and jurisdiction
Aside from the beneficiaries to your estate, allows you to name an executor, a guardian and even a trustee. You can even include funeral arrangement preferences and other conditions that must be fulfilled before your beneficiaries can gain access to their share of the estate.
A trust, on the other hand, is limited to the management and disbursement of assets, so you will not be able to add any other instructions you wish to implement after your death.
3. Passing through probate
Another major difference between the two is that a will passes through probate, while a trust does not.
A probate is a judicial process wherein the court grants the approval for the transfer of a deceased’s person’s assets. The probate, which is typically the executor’s responsibility, can be a lengthy and costly procedure.
Once entered into probate, the will becomes a public record. On the contrary, living trusts can remain private since they do not pass through probate.
5. Leaving assets to a minor or disabled person
The law does not allow you to leave assets to a minor without setting up a testamentary trust through the will or naming a trustee to manage those assets. However, trusts can be used to safeguard funds for someone who is a minor or who has a disability.
6. Tax savings
Trusts can provide tax savings because the assets placed within an irrevocable trust are not subject to estate tax upon distribution. Just remember that irrevocable trusts cannot be modified after their creation.
Clearly, there are benefits and drawbacks to either option and the decision to choose a living trust fund vs will would depend on your requirements.
In most cases, it will be helpful to have a professional’s advice.
Here at Kith & Kin Law Corporation, we offer expert advice on with the conviction to provide the best approach based on our client’s personal circumstances and needs.