Wills vs Trusts: Which One Is Right for You?

Will vs Trust - Which One Is Right for You

No matter how much wealth or material status you accrue in your lifetime, the reality is that you cannot take it with you to the grave. This may sound macabre, but the best way to manage what happens to your wealth after you’ve passed is with a will or trust.  Here we will talk about will vs trust.

If you’re looking to learn which is better suited to you, check out the rest of this blog on wills vs. trusts and get your affairs in order before it’s out of your hands.

Wills Vs Trusts: How to Choose Between the Two While You Can 

Under United States law, passing on money from one spouse to the other is not an issue. This is due to the Estate and Gift Law Tax, which allows for the transfer of wealth to a living spouse without incurring tax liabilities.

On the other hand, should your wealth be passed onto a subsequent generation, this is where it becomes a little more complicated. So if you intend to leave part of your wealth to your children or any other family member, here’s what to know about a will vs trust… 

What Exactly is a Will? 

Also known as a testamentary will, it is a legal document that states how your affairs, i.e. your wealth and assets, must be distributed when you die. 

A will is not only important for the distribution of your assets though. If you are a parent to minor-aged children, your will outlines who is to take guardianship of your children. If this is not outlined in your will, your surviving family members will have to go to probate court. 

A will is also a good place to allocate which portion of your wealth and assets should be passed on to minor-aged children. If you want to get particular, you can also outline how you would like your beneficiaries to use your wealth and assets.

You can also disinherit particular children and even your spouse through a will. In this case, you may not wish to leave them any portion of your wealth. This is dependent on the laws governing your state, though. 

Some of your assets may go into probate when you pass away. As such, your family may have to hire a lawyer and visit probate court which can be an expensive and time-consuming process.

Related: Unveiling the Myths: Common Misconceptions About Will Disputes and Estate Litigation

What Exactly is a Trust? 

A trust is another method of transferring your estate to your beneficiaries. However, trust means that you give another party (a trustee) the authority to distribute your assets as you have outlined.

There are two main categories of trust. The first is a revocable living trust and the second is a testamentary trust. The biggest benefit of a revocable living trust is that it can be used to avoid probate court should you pass away. 

A revocable living trust is also used for the transfer of your estate. It’s called a ”living” trust because it’s created while you are still alive. The word revocable means you are able to make changes to your trust as you see fit, while you are alive. The purpose of this type of trust is to avoid probate court, protect your privacy, and minimize estate taxes.  

This means that, unlike a will, a revocable living trust passes on property outside of probate court. So, your beneficiaries will inherit what you left them without any court appearances or attorney fees. 

The main difference between a will and trust is that trusts are more expensive to create. But, they are a good way to bypass probate court and expensive lawyer’s fees that your family may not be able to afford once you’re gone. 

Feed Your Entrepreneurial Spirit 

If you’re a successful entrepreneur, making the decision between wills vs trust is an important one. Ultimately, you’ll need to decide what’s best for those you leave behind and the life you want them to have.

If you’re looking for more on entrepreneurship, including articles on tech, finance, marketing, and sales, be sure to explore the rest of this site for more!