Estate planning is essential for any individual with significant assets and potential beneficiaries who may inherit them. This process establishes a legal procedure for how, where, why and to whom to transfer certain assets following your death, so the future of your estate is more clearly distributed according to your wishes.
To make it easier on your loved ones, your estate should include legal documents with instructions on how to handle affairs after death. Both wills and trusts include such instructions but differ in scope and legal implications.
In basic terms, a will is a document that lists distributable assets and designates beneficiaries, heirs and executors who will assume responsibility for assets and major decisions regarding your estate. Wills require a valid signature and witness and are only executable after filing with a probate court following your death.
Though a trust also determines the fate of your assets after death, this legal arrangement designates a trustee, often a single person or entity, to whom receives assets. Trusts, both revocable and irrevocable, transfer ownership of assets upon creation, meaning the terms of the agreement can dictate transfer instructions that take place during your lifetime.
Whether a will or trust is right for you and your loved ones depends on many factors. In many cases, an estate plan will include both trusts and living wills, as well as more than one type of trust for specific assets or certain beneficiaries.
A comprehensive estate plan should consider your individual objectives and how to properly protect and distribute your assets most effectively, both during and after your lifetime.