Sadly, none of us can predict when we will die. However, you can make plans now so that day and the time following is easier on your loved ones. If you’re starting to think about your estate plan, a question might start to form in your mind: What’s the difference between a will and a trust, and which one is right for me?
Using a will, trust, and other legal documents to specify your final arrangements after you pass away is crucial. Having these legal documents in place ensures that they know, follow, oversee, and honor your final wishes.
It’s unfortunate that many people pass away each year without leaving clear or written plans for those they leave behind. A drawn-out, complicated, and frustrating distribution of assets often ensues. Your loved ones will also go through the public, dreaded probate court process.
Most people don’t know the main difference between a Will and a Trust in Tennessee. Here, we will provide an overview and the pros and cons so you can decide which option works best for you. Will Gurus is here to help you plan and record your final wishes.
Wills Vs. Trusts
A Will determines where your assets will go after death and is fairly straightforward. You can appoint a guardian for minor children in yours, and it can allow an executor to produce a trust that benefits multiple parties. Wills can also help others make decisions based on your wishes after death.
A Trust can be used to specify what you want to happen if you become incapacitated and are unable to make your own decisions. A trust also avoids probate court. Trusts transfer ownership of a deceased person’s assets to a trustee, who must act according to the written wishes and help the beneficiaries.
An estate planning attorney creates your trust, and the benefit is it’s not a public document like a will. Larger estates and more complicated circumstances may opt to use both a will and trust for distribution purposes.
What are the different types of Trusts?
There are a few types of trusts you should know about:
- Charitable Trusts – These trusts can benefit charities of the deceased’s choosing and allow beneficiaries to receive support financially.
- Revocable Living Trusts – Trusts that the trust maker can revise throughout their lifetime.
- Irrevocable Trusts – The trust maker transfers their assets into the trust, and it is managed by a trustee. The trust maker can not alter the trust. These are typically used to protect assets from creditors or to qualify for programs like long term care Medicaid.
- Special Needs Trusts – Trusts for disabled or special needs individuals to help fund their basic needs while keeping them from losing their public benefits.
What are the advantages of a Will?
The perks of having a will include:
- Affordable and relatively simple to create
- Allows you to control where your assets go after you pass away
- Allows you to appoint guardians for your minor children
- It can help you correctly plan for after your passing
What are the disadvantages of a Will?
Some potential downsides of a will are:
- It is a viewable public document
- Loved ones may pay court fees
- Assets must go through probate
What are the advantages of a Trust?
Some advantages of a trust include:
- Eliminating the probate process
- Often take priority over a will
- Saves time and money with the immediate distribution of assets to beneficiaries named in the trust
- Information is kept confidential, and the document is private
- Offer asset protection and tax advantages
What are the disadvantages of a Trust?
There are a few cons of a trust, such as:
- Typically more expensive and take more time to initially draft
- Must move assets to the trust to fund it
- Can lose tax and asset protection advantages if trust laws are changed or violated
Considerations for creating a Will
When making a will or trust, you must consider several factors to ensure you benefit yourself and your loved ones while following legal guidelines.
For example, your will acts as a set of directions for your assets after you pass. As such, you must who will receive your assets and how they will receive them. You also need to think about how your debts will be paid and who will take care of your minor children. If you have no will upon your death, the Tennessee State court will determine the distribution of your assets. There are certain things that should not be included in your Will.
If you have a complex financial situation, minor children, or prefer to keep your affairs private, you may find that a trust better suits your needs.
Considerations for creating a Trust
When creating a trust, there are several important considerations to keep in mind. First, you need to decide what type of trust best suits your needs now and in the future.
Second, you need to choose a trustee. The trustee is the person who will manage the trust and its assets. It is important to choose someone you trust implicitly and who has the experience and knowledge to properly handle the trust.
Finally, you need to determine how the trust will be funded. The funding source will determine how the trust can be used and how the assets can be distributed.
Contact us to Receive a Confidential Consultation from an Estate Planning Attorney in Knoxville, TN
Will Gurus can help you get your affairs in order for peace of mind today, and in the future. Our law firm only focuses on Estate Planning. Our experienced Tennessee-based team will provide you with a free, confidential consultation and can help you decide if a Will or Trust best meets your needs.
Schedule an appointment with us by calling (865) 666-6175 or clicking here to get started today.