If you’re like many people, you’ve heard the terms “will” and “trust,” but you may not know the differences between them. More important, you may not know which one you need. You’ll find some answers below.
Q: What’s a will?
A: A will is a document that describes what should happen to your property and assets after you pass on. It’s read by a county court after your death, and the court ensures that your final wishes are carried out.
Q: What’s a trust?
A: A trust is a legal agreement that involves three parties:
- The trust maker, also called the grantor — the person who creates the trust and supplies the assets that go into it
- The trustee — the person or financial institution (or both) responsible for managing the trust’s assets for the benefit of the beneficiary or beneficiaries
- The beneficiary or beneficiaries — the people or organization that receive the benefit of the assets owned by the trust
Many different types of trusts exist. A revocable living trust is created and goes into effect during the trust maker’s lifetime. Most often, a trust maker also serves as the trustee during their lifetime. When the trust maker dies, a successor trustee steps in to manage the trust assets.
Q: What can you do with a will that you can’t do with a trust?
A: You can use a will to name an executor (personal representative) for your estate, name guardians for your minor children and their property, and provide instructions for how debts and taxes will be paid.
Q: What can you do with a trust that you can’t do with a will?
A: With a revocable living trust, you can plan ahead for the possibility of becoming mentally incapacitated. You can serve as trustee of the trust you create, but also name a successor trustee, who will step in to manage the trust if you become unable to manage the trust.
You can also use a trust to provide income for one party, such as your spouse, during his or her lifetime, then pass what’s left to another party, such as your children from a previous marriage. Or you can use a trust to provide income to a charity for a certain length of time, then pass remaining assets to heirs. Or vice versa, you can provide income to heirs for some period, then give what’s left to charity.
A trust also allows you to put conditions on an inheritance. With a will, you could leave an investment account to your daughter. But using a trust, you could leave the investment account to your daughter only after she graduates from college, for instance.
Q: What can you do with either a will or a trust?
A: With either a will or a revocable living trust, you can name beneficiaries (including minor children) for property. Both documents can be revised as your circumstances or wishes change.
Whether you need a will, a trust or both depends on your individual circumstances. The experienced estate planning professionals at Seaside Bank and Trust can help you put together a plan that meets your needs. Call your Client Advisor today for an appointment.