Most people know what a will is. It is a document outlining someone’s last wishes. Frequently, those with children will name a guardian in their will, and those with assets name beneficiaries for their property when they die.
Some people will also create trusts as part of their estate plans. What makes a trust different than a will?
A trust takes immediate effect
When you draft a will, the terms in the document have no legal authority until after you die. A trust can take effect as soon as you create the documents for the trust and then fund the trust by transferring assets into it.
You can create a trust now that holds your house and protects you from creditor claims or lawsuits throughout your life while then protecting your family members from Medicaid estate recovery after you die.
A trust is a separate legal entity
A will is essentially a declaration of your legal wishes. It only has authority over your estate and loses power once the representative of your estate fulfills your requests. A trust, on the other hand, can persist for generations.
It can maintain control over assets while still giving beneficiaries access to them. It can then arrange for the disposal of those assets to another generation or even a third party, like a charity, after the beneficiaries die.
Trusts require more care and consideration
A will is a relatively straightforward document. While you can do many things with it, there are limitations to the power a will has. Trusts are capable of doing much more, which means that setting them up requires more effort. You will also need to name a trustee to oversee and administer the trust.
Learning more about how trusts complement estate plans can help you decide if you should create one. Explore your options to see what works best for you.