Confused about the difference between wills and trusts? You’re not alone. They’re often confused, but they serve distinct purposes in helping to divide your assets.
A commonality? They’re frequently put off. A 2014 survey by Rocket Lawyer found wills lacking in 51 percent of American respondents 55 to 64 (62 percent of those 45 to 54). Fifty-seven percent "just hadn’t gotten around to making one," 22 percent said it wasn’t urgent, 17 percent called it unnecessary and 14 percent were avoiding thoughts of death.
The difference between a will and trust?
In general terms, a will governs who will own your assets and care for your minor children when you die. In its absence, the court appoints a guardian and executor, then follows the legal guidelines in your state to determine validity, establish beneficiaries, hear objections and ensure creditor payment.
A trust is a legal document that (usually) bypasses probate by assigning ownership of a given asset — i.e. stocks, bonds, a bank or brokerage account, life insurance policy, real estate, collection, business interest, personal possession or vehicle. Trusts can be created during life or after death, and can be created for a specific purpose, such as a college education or philanthropic cause. With a revocable trust, the initiator (trustor) can access the asset within his lifetime, with the beneficiary getting the remainder after his death. Throughout, a company or person known as the trustee holds and manages the property. Parents often establish trusts for their children to prevent lump-sum financial distributions. Trusts generally minimize court intervention and may minimize estate taxes, protect property from creditor claims and keep your financial affairs out of public record.
Deciding your optimal option depends on your circumstances and family. But denial aside, making decisions about your legacy ahead of time can lead to benefits tangible and intangible.
"You’ll know you’ve taken care of your loved ones the way you’d like, you’ll protect your physical and digital assets … and you’ll be able to avoid family skirmishes over who’ll get which assets," advises Richard Eisenberg in Forbes.
To learn more about wills and trusts, contact a Boulay advisor at 952-893-9320 or learnmore@BoulayGroup.com.
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