Wills and trusts are similar and yet very, very different. While both are estate planning tools, they operate completely differently. There are advantages to using trusts that are completely absent when it comes to wills. However, not everyone will need a trust to distribute their assets.
In this article, we will discuss the differences between wills and trusts and when you might want a trust to distribute assets instead of a will.
What is a Will?
A will is a document that determines what happens to your assets after you pass. The simplest will was left by a man who was about to die in a farming accident. He scrawled, “All to wife” just before he passed. However, legal wills require more than a letter left in blood. They require witnesses and a notary public to notarize the will.
The benefits of a will are limited to the consequence of not having one. If you die without a will in place, then your estate is distributed in accord with the rules of intestate succession, which is an algorithm designed by the state to distribute your assets. Essentially, your spouse will be first in line, with your children coming in second, parents third, and anyone else you are related to afterward. You have no control over this process.
The downside of wills is related primarily to what trusts can do that wills cannot. We will discuss this in the next section.
What is a Trust?
A trust is a legal container for assets. Normally, human beings own assets. However, human beings can transfer assets into trusts which, depending on the type of trust you own, can remove the asset from your estate, which can be useful for tax purposes.
Trusts are drafted by estate planning attorneys and have specific terms that trigger specific provisions. For example, a trust can be set up to distribute assets to a particular heir when you pass. Often, parents with children who have special needs and will not be able to join the workforce establish trusts for their children, but trusts can also fulfill much more mundane needs.
The major benefit of a trust is that it avoids the probate process. A trust that is established as part of your estate plan is triggered to go off once you die. Once the trust is triggered, the assets pass directly to your heirs, thus avoiding probate and the courts.
Why Avoid Probate?
When your assets pass through probate, the first thing that happens is that the court contacts your creditors. While you cannot avoid paying your creditors, you can avoid them holding up your estate disbursement indefinitely while they argue over what assets need to be liquidated to satisfy your debt. For your creditors to access assets within the trust, they would actually have to sue the trust, which may not be worth the time, effort, or money to pursue.
Further, assets passed in a trust are not part of the public record. Once the courts get involved, all assets that pass through probate are accessible to the public. Those who prize their privacy prefer trusts to wills for this reason.
Talk to an Ohio Estate Planning Attorney Today
For more information on trusts and wills, call the Ohio estate planning attorneys at Kryszak Law Firm, Co., LLP today to discuss the matter in more detail.