Everyone has dreams for their future, and it’s always a good idea to start planning for them. Having a will or trust set up shows that you’re taking action to achieve the future you’re dreaming of.
With so many will and trust options, however, it’s difficult to choose which one best meets your needs. To fully understand the difference between a will and trust, you have to first define them. Below, we break down the difference between a will and trust for you.
Defining a Will and Trust
The difference between a will and trust is that they are both legal documents that relate to planned financial matters, such as the distribution of assets upon death. However, there is a key difference between the two.
Writing a will is more limited in scope when compared to a trust and indicates how one’s estate should be handled after death. Types of trusts, on the other hand, are more encompassing and allow for control of assets both during and after one’s lifetime.
It can also be used for a variety of reasons, including tax planning, asset protection, and estate planning.
Elements of a Will
The primary element of a will is the appointment of an “executor.” This is a person appointed by the deceased prior to death to be responsible for settling estate matters and ensuring the deceased’s wishes are respected.
An important element of a trust is the “trustee.” A trustee is a person, or persons, responsible for managing the assets of the deceased consistent with the trust document.
This individual may also have authority over other matters, such as who will benefit from the trust’s assets. Additionally, a will deals with assets on death, while a trust can provide continuing support and management for impactful investments throughout the duration of the life of the trust.
Tax Implications of a Trust
In regard to the tax implications of trust, trusts may offer the settlor great flexibility in terms of reducing taxes, protecting their assets, and managing estate planning goals.
Trusts may be used to minimize the tax obligation of disbursements, meaning that estate taxes can be deferred for a period of time until the trust has been liquidated or until the terms of the trust have expired.
This can save heirs substantial taxes. Additionally, more on delegated trusts may be used to pass assets to beneficiaries in a more tax-effective way, meaning recipients will often be offered more financial protection and able to benefit from more versatile benefits.
Learn the Difference Between a Will and Trust Now
In conclusion, the key difference between a will and trust is that a will is public, and a trust is private. A will is only effective after death, whereas a trust offers protection and can be in effect while one is alive.
If you want to ensure your wishes are carried out after you’re gone, it’s important to make a will or trust immediately. Contact an experienced attorney today to discuss your options.
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