Trusts and wills have important differences in how your assets are distributed and controlled after your death. Family trusts and wills are both worthwhile estate planning tools that can make sure your assets are protected and will pass to heirs the way you intended, says MSN’s recent article entitled “Family Trusts vs. Wills: What Are the Differences Between These Estate-Planning Options?”
Remember that without a will, the state probate laws will determine what happens to your assets. It may or may not be what you want. In contrast, a will lets you state to whom you want to distribute your assets. Everyone should have a will. It’s a way to leave bequests, nominate guardians for a minor child, and an executor.
A living trust is a wise choice for those who want to provide for the management of their assets if they become incapacitated, people interested in keeping information about their assets and who inherits those assets private and those who own real estate or have a larger estate. Here are some other situations in which a family trust would be appropriate to use:
- Asset protection from creditors and divorce (for you as a grantor or your children’s marriages)
- For disabled beneficiaries who need to qualify for government benefits
- For tax-planning; and
- For cost and time efficiency over a lengthy probate process.
If you have a family trust, you still need a will. There may be some assets not owned by the trust, such as vehicles and other personal property. There may also be payments due you at your death. Those assets must go through probate, if not arranged to avoid probate.
Once that process is complete, the assets are distributed to the family trust and are governed by its provisions. This is what is known as a “pour-over will” because the assets “pour over” to the family trust.