Writing a will is a central step to take when creating an estate plan. It can be the basis for the broader plan, and many people think of it as their entire plan. In other words, if they are going to start doing their estate planning, they believe this means they just need to write a will and then they’ll be done.
But the reality is that there are many beneficial estate planning tools. They can accomplish all sorts of different goals, extending far beyond what a will can accomplish. One example involves setting up a trust.
The goal of a will
When someone writes a will, they’re creating a legal document to help their heirs and beneficiaries. It tells them which assets or pieces of property are supposed to go to which individuals. The estate executor then reads the will, inventories the assets and passes them out accordingly. A will can also name a guardian for a minor child, address pet care concerns and specify preferences for funeral and burial concerns.
The goal of a trust
By contrast, an individual can transfer assets into a trust before they pass away. The trust then owns these assets. They can also name a trustee, which is the person who is in charge of distributing those assets in accordance with the guidelines they’ve been given. When it comes to some trusts, once the person who drafted the trust passes away, the trustee takes over.
Other trusts may serve functions while the trust creator remains living. For instance, people will sometimes use trusts as a way to reduce the value of their holdings, which may be beneficial for tax purposes. Others may fund a grandchild’s education with trust assets or provide for an adult with special needs without compromising that individual’s ability to receive government benefits.
Considering your options
Ideally, an estate plan will have many different documents that all work together to accomplish specific goals. If you are creating an estate plan, carefully consider the legal options at your disposal before considering yourself “done” with the estate planning process.
