How should wealth be distributed among family? Which is the best path to take? It is a simple question with a complicated answer.
Do you know the difference between wills and trusts? Do you know whether you need one or the other, or both?
What is a will?
A will is a physical document that designates to whom you wish to receive your assets and take care of your minor children after you are gone. They usually contain two important elements – a description of your assets and a passage naming who will receive them. You can include special instructions in your will, such as how to split your assets between loved ones and favorite charities.
Other issues you should know about your will include:
- A will is subject to probate, and the process must start within four years of the creator’s death.
- A will is public. The public can see the details of your family’s assets and final wishes.
- A will must be signed with two witnesses who are not named beneficiaries in your will.
- In Texas, you may create a handwritten or an oral will.
What is a trust?
A trust is another estate planning document that allows you to distribute your assets privately. While there are many types of trusts, they provide some distinct advantages over wills:
- Revocable or “living trusts” can be revised during the testator’s lifetime. This is different from a will, which only becomes effective after the author’s death.
- A trust may allow you to skip the probate process and its associated costs.
- The directions in a trust are carried out in private, away from the eyes of the public. This could prove essential in high-profile deaths where a family is concerned for their privacy.
- A trust must be signed and notarized.
Wills and trusts are very different, serving different purposes as part of your estate plan. Using them together can put you at peace about the future and help preserve the financial security of your family once you are gone.