They come up in movies and are mentioned by families and friends, but what are Wills and Trusts?
Wills and trusts are legal documents that help distribute a person's assets and property after their death. A Will is a written document that outlines how a person's property should be distributed after their death. A Trust is a legal agreement where a trustee holds and manages property for the benefit of another person, called the beneficiary. Unlike Wills, Trusts can be set up during a person's lifetime and can help avoid probate, minimize taxes, and provide for the management of assets for beneficiaries who are minors or otherwise unable to manage them.
What can I do with a Will that can’t be done with a Trust?
Only a Will can appoint a Guardian for Minor Children. Wills and Trusts serve different purposes in estate planning. One of the key functions of a Will is the ability to appoint a guardian for minor children. This is a critical consideration for parents of young children, as it ensures that the children will be cared for by someone the parents trust in the event that both parents are unable to care for them. While a Trust does not have the power to appoint a guardian for minor children, unlike a Will a Trust can provide ongoing management and distribution of assets for young, irresponsible or disabled beneficiaries.
Designate an Executor to represent your Estate during Probate to the Orphan’s Court. A Will also has the ability to designate an executor, who is responsible for carrying out the instructions in the Will and settling the estate. An executor is only required if the decedent’s plan failed to avoid the probate process.
What can a Trust do that a Will cannot?
Avoid probate. Probate is the legal process of distributing a person's assets after their death. Trusts can help avoid this process because the assets are transferred to the beneficiary outside of probate court.
Provide for asset management. Trusts can be set up to manage assets for beneficiaries who are minors or otherwise unable to manage them. Although a Will can provide for the creation of a trust after the individual’s death, the Will itself does not provide for ongoing asset management.
Minimize taxes: Trusts can be structured in a way that provides lifetime estate and gift tax planning. Because Wills become operational at death they do not have this tax-saving capability.
Maintain privacy: The probate process is a matter of public record, so anyone can see the contents of a Will and the distribution of a person's assets. Trusts, on the other hand, are private agreements and do not go through probate, so their contents are not publicly disclosed.
Provide for incapacity planning: A Trust can provide for asset management and distribution in the event the grantor becomes incapacitated, but a Will does not take effect until after death.
It's important to note that Wills and Trusts often complement each other and can be used in combination to address different aspects of estate planning.
