Will or Trust

Both Trusts and Wills name a representative of the assets, assign who will receive what assets at death, are legally binding documents and can involve expensive fees.

With wills, a financial concern is the cost of having a good one made, and the inheritance tax (see state laws for threshold), and with trusts, the concern is for the income tax the beneficiary has to pay as well as the cost to set up and manage a trust. 

​

It is very important to go over all the small details when trying to decide the right option for you and your family. Some information about wills and trusts that may help you pick the best option for you is listed below. 

​

Wills designates how to manage your assets upon your death. The creator of the will (testator) elects an executor to handle estate affairs upon their death. These affairs can include the guardianship of minor children or pets, distribution of property and assets and funeral arrangements. Wills do not include assets that are owned jointly- those will transfer to the surviving co-owner upon your death. State laws for wills vary. 

 

Why a will?

Making a will is relatively easy and can be affordable, too. Wills can range from $300-$1,000, depending on the complexity of the estate and the method used to create them. A will is often the first step and the one that shouldn't be skipped, but it can only cover so much. Directives such as trusts, medical directives and power of attorney arrangements can be used to ensure your wishes are carried out completely and thoroughly. Trusts, in particular, give you more control of your assets and potentially help you avoid estate tax (see state laws). If you already have a trust, making a will is still necessary. A trust doesn't include all of your assets and property; a will does. Wills also allow you to indicate preferences that trusts don't, such as who will be guardians for your children, if they're minors, in the event of your death. 

​

​

Trusts form a separate legal entity and fiduciary relationship, where the creator (grantor), puts assets in the name of the trust and authorizes another person (called a trustee) to distribute those assts to the trust's beneficiaries. 

Living Trusts, also known as revocable trusts, allow you to change the beneficiaries and assets as long as you're alive and physically and mentally able to do so. You can also name yourself as the trustee and name a co-trustee or successor trustee. 

Irrevocable trusts are permanent once they're signed and funded. The assets in the trusts, and the beneficiaries you name cannot be changed. This type of trust may help reduce your estate taxes, as the assets aren't technically yours- they belong to the trust, which is a separate entity. 

​

Why a trust?

You need more control over your assets. Trusts give you greater control over your assets as they outline specific rules or conditions for how they will be distributed (a will is unable to do this). For instance, if parents want their children to inherit income only at certain times, protect assets after a divorce or look after a child with special needs, these wishes can be accomplished through specific terms. You can even control how the inheritance should be spent. But it can also be complicated to deal with assets once they're held in the trust; for example, if you're refinancing property, some lenders may make you remove the property from the trust.