There are many different terms that the average person may not be familiar with. One of the most confusing to the general public is the difference between a trust and a will. What are the main differences between these two legal entities? This article will give you all the information you need to make an informed decision about which type of entity is right for your needs.
WHAT IS A TRUST?
A trust is used to give another person a title to a certain property or asset. When you are putting your house in a trust, it means that the trust will own the property, but you will still be able to live there. The trust can also sell the property or pass it along to someone else if something happens to you. You can also put stocks and investments into a trust. This way, you know that they will be taken care of after you die.
Trusts are very common in estate planning because they offer a lot of flexibility for the person who sets them up. They can also help protect your assets from being divided among your heirs too much. If you have a trust, make sure that you name a trustee. This is the person who will manage the trust on behalf of the people who are named in it.
THE MAIN FEATURES OF TRUSTS
There are certain features that are common to all trusts. The main features of trusts are:
- Control: the settlor (the person who creates the trust) retains control over the trust property, although this may be delegated to one or more trustees.
- Beneficiaries: the beneficiaries are those people who will benefit from the trust property.
- Trust Property: the trust property is the assets that have been transferred into the trust. These assets can be anything from cash and shares to land and buildings.
- Duration: a trust will continue until it is wound up by either the trustees or the beneficiaries.
- Taxation: trusts can be taxed in the same way as sole traders and companies.
- Trustees: these are people that have been appointed to manage the trust on behalf of its beneficiaries.
WHY DO PEOPLE CREATE TRUSTS?
People create trusts because they want to ensure their assets are distributed in the way they want after they die. A trust allows you to name a trustee who will manage your assets for the benefit of your beneficiaries. You can also specify how and when your beneficiaries will receive the assets. This can be helpful if you have children from different marriages, or if you want to provide for a loved one who is not able to care for himself or herself.
Another reason people create trusts is to avoid probate. When someone dies intestate (without a will), his or her estate goes through probate court where it is divided among the deceased’s heirs according to state law.
WHAT IS A WILL?
A will is a legal document that states a person’s wishes regarding the disposal of their property after they die. The will can also name a guardian for any minor children. Typically, a will is prepared with the help of an attorney and must be signed in front of two witnesses in order to be valid.
If a person dies without a will, their property is distributed according to state law. This can often lead to a lengthy and complicated legal process, so it’s important to have a will in place if you want to ensure your wishes are carried out after you die.
THE MAIN FEATURES OF A WILL
The most common main features of a will are the main components that make up this type of legal document.
The main feature is what they call “the residuary clause”, which basically states who gets whatever remains in your estate after you have covered all debts and expenses, including taxes. Another main component would be whether or not to appoint an executor for your will. It makes sense if you want somebody else to handle matters when you die so as to avoid any possible confusion about how things should proceed with your affairs. However, naming someone as an executor can create conflict and sometimes even anger among family members so many people don’t include this feature into their wills at all anymore.
WHY DO PEOPLE CREATE WILLS?
People create wills because they want to ensure their loved ones are taken care of after they die. A will is a document that outlines how someone wants their belongings and property divided up after they pass away. Without a will, the court will decide how to divide up the person’s assets, which may not be what the deceased would have wanted.
Another reason people create wills is to designate who will take care of their children if both parents die. The will can also name a guardian for any minor children. This is especially important if the parents do not have any close family members who can take on this responsibility.
Trusts are usually something you should get even when getting a will because of protection and tax benefits. Both of these legal documents are important, but you have to know why people create them. After getting informed you’ll see what fits your situation better. Just make sure to be precise!