The terms will and trust often get confused, but they have different connotations when dealing with estate planning. So, as you begin to draw out your plans, you should seek to understand the key differences between wills and trusts. The following guide helps you understand both terms better and explores which one benefits you as you plan out your estate.
The Difference Between Will and Trust
Both obtained documents are tools that help ensure all accumulated assets are protected and given to your heirs when you pass. All in all, a trust grants transfer of assets to heirs while you’re still alive, and a will can pass on assets to heirs upon the death of the beneficiary. Here’s more on the key differences between wills and trust.
The Different Types of Trusts
A trust is a document that protects and transfers assets to an heir while the beneficiary is still alive. However, you need to know a few different types as you complete your estate planning. Here are the two types of trusts.
The Revocable Living Trust
A revocable living trust changes or revoke the terms of the trust at any given time while you’re still alive. This trust type explains how trustees need to deliver assets to beneficiaries before or after you’ve passed or cannot provide the distributions yourself.
A testamentary trust is a trust that gets taxed at the state rate. This trust type gets distributed under a doctrine testament given upon death. A fiduciary, or third-party, handles the testamentary. The fiduciary is someone that has formed a relationship with the beneficiary of the trust.
The Different Types of Wills
A will is a document that’s split into four categories but can include other sub-types. However, we’ll focus on the four primary wills you deal with when setting up your estate plan.
An ordinary, or simple, will is the standard type used in estate planning. The process of a simple will consists of deciding where assets go and naming guardians for children.
Testamentary Trust Will
A testamentary trust will sets assets into a separate trust account for beneficiaries. The trustee assigned to this handles all assets given to children once they reach a certain age. This type of will also prevents others from spending their inheritance in one sitting.
A joint will is a signed document that permits spouses to separate the will and inherit everything. These documents become mutual agreements stating that the spouse inherits the entire estate. Once the second spouse that inherited the estate passes, the next set of will terms gets executed to children.
A living will permits a person to make crucial decisions on your behalf. For example, a spouse or healthcare provider can make decisions for you.
As you begin the estate planning process, Vancouver Wills and Trusts can assist in processes that deal closely with wills, trusts, estates. Our legal experts can determine the best course of action when planning your wills and trusts.