What Is the Difference Between Wills and Trusts?
Wills and trusts are both important and valuable tools in estate planning. But there is a significant difference between a will and a trust. Virtually every estate plan includes a will. Since a trust can accomplish goals that a will cannot, some estate plans benefit from inclusion of a trust. In this discussion, our estate planning attorneys at Asset Protection & Elder Law of Georgia explain the primary distinctions between a will and a trust.
Distributing Property After Death
Providing for distribution of property after death is one of the main reasons for making an estate plan. If you don’t create legal documents to distribute your estate, Georgia laws determine the distribution of your estate for you. A Last Will and Testament may include provisions relating to distribution of property to designated beneficiaries. A trust can also distribute property to beneficiaries.
When property is distributed in a will, the beneficiary receives full control of the entire inheritance. The person making the will has no way of exercising control over how the inheritance is used. The beneficiary can give it away, spend it all immediately, lose it to creditors or other third parties, or waste it in other ways.
In contrast, a trust is used to distribute property, the grantor (person creating the trust) controls distribution of the trust assets. The terms in the trust document establish how the designated trustee distributes assets to the beneficiaries. Property can be distributed periodically over time, only for specific purposes, or under other conditions contained in the trust document. Trust distributions can extend for years after the death of the grantor.
Control over property distribution is one of the primary differences between a will and a trust. You may benefit from including a trust in your estate plan if you wish to provide for your loved ones well into the future, have concerns about the financial responsibility of a beneficiary, or want to accomplish other special goals in your estate plan.
Avoiding Probate
Probate is a statutory legal process that many Georgia estates must complete. The process takes time and involves costs and expenses. The financial details of the estate become public information when an estate goes through probate. For those reasons, many people wish to avoid probate.
Distributing property in will does not avoid probate. However, a properly structured, executed, and funded trust can avoid the probate process entirely. If you want to maintain the privacy of your financial information and save time and costs in estate administration by avoiding probate, a trust can help you accomplish that estate planning goal.
Protecting Assets
Trusts are a flexible estate planning tool that can accomplish many different estate planning goals that a will cannot accomplish, such as:
- Addressing management of finances for minor children
- Spreading payments over a period of time
- Limiting distributions to specific purposes, like education
- Protecting your family legacy for your children and grandchildren, including preventing access by a child’s former spouse
- Providing for children in a blended marriage
- Controlling distributions to a financially irresponsible beneficiary
- Protecting assets for nursing home care and Medicaid benefits
- Safeguarding assets from creditors and other legal liability
- Protecting an IRA or 401(k) retirement account affected by recent tax law changes
- Reducing or avoiding federal taxes
The above examples are just some ways that a trust can protect assets when it is part of a sound, complete estate plan. Any trust must comply with complex federal and state laws to accomplish the intended purposes. You should never attempt to create a trust without getting help from a knowledgeable estate planning lawyer.
Determining What’s Best for Your Estate Plan
A will accomplishes several goals in an estate plan, in addition to distributing property to beneficiaries. For that reason, most estate plans include a will. But the nature and role of a will varies, depending on the overall structure of the estate plan.
Your estate planning lawyer helps you determine whether you can benefit from including a trust in your estate plan, based on your personal and financial circumstances and your estate planning goals. If you decide to include a trust in your estate plan, your lawyer creates a trust document that specifically addresses your unique situation. Your lawyer may also structure your will to reflect the role of the trust. Most estate plans with a trust have a pour-over will.
Whether your estate plan includes only a will or both a will and a trust, creating an estate plan is a very important and complex task that requires specialized legal training and knowledge. You should never attempt to create a trust or any other estate planning document without assistance from an experienced estate planning attorney. Do-it-yourself or DIY estate plans and estate planning documents create substantial risks for you and your loved ones.
Talk With a Georgia Estate Planning Attorney
Our Cartersville estate planning practice at Asset Protection & Elder Law of Georgia focuses on helping clients find the best solutions for all their concerns, including whether to include a trust in their estate plan. We provide a broad range of legal services to clients throughout the communities northwest of Atlanta, including in Bartow County, Cobb County, Cherokee County, Gordon County, Floyd County and Paulding County.
To schedule a consultation, call us at (770) 382-0984 or contact us through our online form.
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