When it comes to estate planning, many people are confused about the difference between a will and a trust. Simply put, a will is a document that outlines your wishes for your estate after you die, while a trust is a legal entity that can hold assets on your behalf.
We will discuss the types, roles involved, the prerequisites, etc of each.
1) WHAT IS A WILL?
A will, also known as a "last will and testament," is a document that specifies how you would like your assets to be distributed after you die. You can use a New York will to:
- designate a guardian for your minor children
- name an executor to manage your estate
- spell out how you would like your assets to be distributed
2) WHAT IS TRUST?
A trust is a legal entity that can hold assets on your behalf. You can use a trust to:
- manage assets during your lifetime
- distribute assets after your death
- reduce or avoid estate taxes
3) TYPES OF TRUSTS
There are many different types of trusts, but the three most common are:
- revocable trusts: These trusts can be changed or revoked at any time.
- irrevocable trusts: These trusts cannot be changed or revoked.
- living trusts: These trusts are created during your lifetime and can hold assets on your behalf.
4) WHO IS INVOLVED IN A TRUST?
There are three parties involved in a trust:
- the grantor: the person who creates the trust
- the trustee: the person who manages the trust
- the beneficiary: the person who benefits from the trust
5) WHAT ARE THE PREREQUISITES FOR A WILL?
In order to create a valid will, you must be at least 18 years old and of sound mind. You must also sign the document in front of two witnesses.
6) WHAT ARE THE PREREQUISITES FOR A TRUST?
Like a will, minors cannot create a trust. You must have the mental capacity to understand the terms of the trust and the consequences of creating it.
7) HOW IS A WILL EXECUTED?
A will must be signed by the person creating it (the "testator") in front of two witnesses. The witnesses must also sign the will.
8) HOW IS A TRUST EXECUTED?
A trust does not need to be signed by the person creating it (the "grantor"). However, the trustee must sign the trust agreement before a witness.
9) HOW IS A WILL DIFFERENT FROM A TRUST?
The main difference between a will and a trust is that a will takes effect after you die, while a trust takes effect as soon as it is created.
Another difference is that assets passed through a will must go through probate, while assets held in a trust do not. Probate is the legal process of distributing a person's assets after they die.
Finally, a will subject to probate will be publicly available, while a trust generally will not.
10) WHAT ARE THE BENEFITS OF A WILL?
The benefits of a will include:
- clarity: A will can help to avoid confusion about your wishes after you die.
- peace of mind: A will can give you peace of mind knowing that your wishes will be carried out after you die.
- control: A will gives you control over how your assets will be distributed after you die.
11) WHAT ARE THE BENEFITS OF A TRUST?
The benefits of a trust include:
- avoiding probate: Probate is a legal process that can be time-consuming and expensive. A trust can help to avoid this process.
- privacy: A trust is not part of the public record, so your affairs will remain private after you die.
- flexibility: A trust offers more flexibility than a will in terms of how and when assets are distributed.
12) WHAT ARE THE DRAWBACKS OF A WILL?
The drawbacks of a will include:
- probate: A will must go through probate, which can be time-consuming and expensive.
- public record: A will submitted to probate will become publicly available, so your affairs will be open to the public after you die.
- inflexibility: A will offers less flexibility than a trust in terms of how and when assets are distributed.
13) WHAT ARE THE DRAWBACKS OF A TRUST?
The drawbacks of a trust include:
- cost: Trusts can be expensive to set up and maintain.
- complexity: Trusts can be complex legal documents, so it is important to seek professional help when creating one.
- inflexibility: Once a trust is created, it can be difficult to change.
14) WHICH IS BETTER FOR YOU?
The answer to this question depends on your individual circumstances. If you have a simple estate, a New York Will may be all you need. However, if you have a complex estate or want to avoid probate, a trust may be a better option.
At the end of the day, the best way to decide whether a will or trust is right for you is to speak with an experienced New York estate planning attorney. A New York attorney can help you understand your options and make the best decision for your unique situation.
Schedule a consultation with our office today to get started.
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Nasser Law PLLC is a full-service law firm that provides legal services to individuals and businesses in the New York area. We offer a wide range of legal services, including estate planning, probate, and business law. Contact us today to schedule a consultation.