It is important to have an understanding of wills and trusts. One mistake that many people make is assuming that an estate will default to heirs when a loved one passes. The best method for ensuring this takes place is to establish a trust.
Wills and Trusts: What you need to Know
Setting up a trust is the first choice of many people to pass on an estate to heirs. A trust is an estate planning tool that is rapidly increasing in popularity. This is also a preferred method to avoiding probate, which is the legal process to determine if a will is valid and to appoint a personal representative.
There are two basic types of trusts. One is revocable and the other is irrevocable. Both should be established with a qualified attorney. This is a document that designates a responsible party to manage your property. Trusts are often times referred to as “living trusts” because they are established while you are living. A revocable trust can be changed or dissolved at any point as long as you are mentally competent. An irrevocable trust cannot be changed or dissolved by the creator once the trust is fully executed.
What’s the Difference Between Wills and Trusts?
The main difference between a trust and a will is privacy. The trust is much more private and will avoid probate, whereas a will becomes a matter of public record through the probate process. In the instance that a will or trust does not exist for the deceased, the remaining property and assets will in most cases pass to other relatives in accordance with the probate rules of intestacy. This means that you don’t get to choose who your estate will be left to. The probate court process can be time consuming and costly.
Lisa shares, “I’m working on a probate of estate for a woman whose husband passed away unexpectedly. They left two children. It’s been a sad and difficult time for the wife and children. I’m taking care of all of the paperwork required for the probate of the estate, and assisting with other non-probate paperwork such as insurance beneficiary claim forms. She said it was such a relief to have me help her because it’s too difficult of a time for her to do this on her own, and she didn’t know where to even begin.”
The aforementioned situation that Lisa shared is very sad, but manageable, especially with Lisa’s help. In the event that her client had a will or trust in place, much of the complications could have been avoided. A trust can protect your heirs and your assets in the unexpected moments that you may be unable to manage your own property. This is a significant peace of mind to many people.
A trust cannot protect you from an angry or disappointed heir. However, because your wishes are clearly stated, a trust can quickly resolve family conflict when dealing with inheritance details. Both a trust and a will can be challenged by an heir that has been removed as a beneficiary.
