What Are the Differences?
If you’re like more than 2/3rds of Americans, you don’t have any formal estate plan in place to ensure the orderly distribution of your property in the event of your death. That typically means that your assets will be divided under state “intestacy” laws, which may or may not conform with your wishes. Putting a solid plan in place may be the greatest gift you can give to your loved ones after your death, as it alleviates stress and uncertainty, and allows them to focus on their grief.
When you’re contemplating setting up an estate plan, though, there are different strategies you can take. You can make gifts during your lifetime or you can retitle your assets, so that they automatically pass upon your death. Another approach is to draft and execute a legally enforceable document that identifies how property will be allocated. The two methods commonly used to do that are wills and trusts. What’s the difference? What’s best for you?
What Is a Will?
A will, also commonly referred to as a “last will and testament,” is a legal document that typically:
- Names a person to act as executor, administrator or personal representative of your estate
- Directs that person to pay all final debts and submit any necessary tax returns
- Names primary or contingent guardians for any minor children or adults for whom you serve as guardian
- Identifies how your property will be allocated after your death
There are a number of formality requirements for a will to be valid. It must generally be in writing, and the person executing the will must generally be a specific minimum age (and be of sound mind). Furthermore, wills must typically be witnessed.
All property that passes through a will must also go through the probate process, whereby the probate court oversees the settlement of the estate. This can add significant time and expense to the final distribution of property and closure of the estate.
What Is a Trust?
A trust is a legally enforceable document that creates a new legal entity (the “Trust”), which has the legal authority to own, buy, sell and make other decisions about property or assets. The primary purpose of a trust is to avoid sending the property of an estate through the probate process. As a general rule, when a trust is created, the person creating the trust (the “trustor”) transfers all or most property to the trust. When that person dies, only property actually owned at the time of death will be subject to probate. Because the property is owned by the trust (and not by the deceased), it is not subject to probate.
Contact MCIS Law
At MCIS Law, PLLC, in Stafford, we provide comprehensive estate planning counsel to individuals in southeast Texas. For a confidential consultation with an experienced and knowledgeable lawyer, email us or call our office at (346) 297-0121. We accept all major credit cards.