Diving into estate planning? Wills and trusts are pivotal elements, but understanding their core differences is crucial. Let's unravel the mystery together. 
Many people are confused and overwhelmed by the estate planning process, and rightfully so! There are many different types of estate planning documents that you can execute to ensure that your assets are protected and your final wishes carried out.
One common source of confusion is distinguishing the difference between a will and a living trust. So, here is a comparison of a living trust vs. will, as well as what these estate planning documents are best for and how they differ from other legal strategies.
Introduction to Wills and Trusts
At the heart of estate planning are two stalwarts: wills and trusts. Though they both aim to manage and distribute your assets posthumously, the mechanisms they employ, and the subtlety in their operation, differ significantly. Jumpstarting an estate plan begins with grasping these differences. This section illuminates the essence of wills and trusts, setting the stage for a deeper dive.
Understanding the Living Trust
A living trust is created during a person’s lifetime and designates another person as a trustee to manage the creator’s assets for the final beneficiary. This document helps avoid the probate process so that assets can easily reach the beneficiary upon the trust creator’s death.
Living trusts can be revocable or irrevocable, depending on whether you want the ability to amend the trust’s terms later or avoid tax burdens. Other benefits of a living trust include being able to save your estate money after your death and securing your privacy since living trusts, unlike wills, are not made part of the public record.
Unlike wills, a trust is a legal arrangement providing a third party, or trustee, authority to manage assets on behalf of beneficiaries. Trusts come into effect during your lifetime, at death, or afterwards, depending on the type of trust established.
The beauty of trusts lies in their flexibility and the privacy they offer, bypassing the probate process entirely. Assets placed in a trust can be distributed according to precise terms set by you, which could include stipulations based on age, achievements, or milestones.
Trusts, however, can be complex, requiring diligent drafting to ensure your wishes are accurately reflected. They can encompass anything from property to investments, ensuring your assets are protected and passed on in the manner you see fit.
Understanding the Will
A separate legal document is a will, which establishes your final wishes after your death, including how your property will be distributed and how any minor children will be cared for. Some people create handwritten or oral wills, but to have a will fully recognized by the legal system, it is best to make an official will with the help of a New York estate attorney.
A will, traditionally known as a last will and testament, is a legal document that dictates how your assets are distributed upon death. It’s where you can appoint guardians for minor children and express your final wishes. Simple in concept, wills undergo a probate process, making them public records. The necessity of probate means your estate is handled under court supervision, which has its own timeline and potential complications.
Creating a will offers clarity and direction for the distribution of your assets, diminishing the likelihood of disputes among heirs. It's a cornerstone for anyone beginning to layout their estate plan.
Remember that a will allows a person to direct how his or her possessions are distributed, such as property and bank balances. However, certain things are not typically covered in a will, such as life insurance policy and investment account payouts because these types of policies have their own specified beneficiaries previously established.
Legal Requirements and Processes
Both wills and trusts must adhere to specific legal standards to be deemed valid. For wills, this includes being of sound mind at the time of signing, having it witnessed, and ensuring it meets the state's formal requirements. Trusts, too, must follow legal protocols, with clear definitions of trustees, beneficiaries, and the trust's purpose.
The probate process for wills can be lengthy and public, exposing your estate to public scrutiny. Trusts, conversely, allow for a more seamless transition of assets, away from the public eye.
The Difference Between a Will and a Living Trust
A primary difference between a will and a living trust is that a trust involves a trustee to handle your assets for your third-party beneficiaries, while a will does not. A living trust can address the transfer of property and leave property to young children; however, a will can name guardians for children and provide instructions about debts should be paid.
Living trusts are often more complex to create, but we can help walk you through the process. The two legal documents are similar in that they help you avoid the probate process and name beneficiaries.
How These Documents Differ from Other Estate Planning Tools
Living wills and trusts are just two types of estate planning documents, and we can assist you with much more at Alatsas Law Firm as well. Estate plans also benefit from having a durable power of attorney, healthcare power of attorney, beneficiary designations, guardianship designations, and letters of intent.
How to Choose Between Living Trust vs. Will
If you could use some guidance about whether a living trust vs. will is right for your personal situation, our dedicated team of legal experts can help. We are based right here in Brooklyn and know New York estate law better than anyone.
For a free estate planning consultation, please call us at 718-233-2903 or fill out our online form to get in touch. We understand that everyone’s financial and property situation is unique, and we look forward to helping you create the legal documents you need to ensure your matters are handled and your loved ones cared for in the future.
