A solid estate plan can include a will or a trust or both. The right approach depends upon each client’s particular situation.
A basic understanding of what wills and trusts accomplish helps individuals determine what route to take when planning for the future.
Key elements of a will
According to information from Nerdwallet, a will directs the management of assets upon a person’s death. The creator of the will assigns an executor to handle affairs after his or her death. Wills can range in complexity from fairly simple to quite complex and can control such matters as the guardianship of young children, the payment of funeral expenses and the distribution of assets to heirs.
While a will remains an essential part of estate planning, it could have shortcomings for some individuals. Some potential disadvantages of a will include the following issues:
- Does not provide protection during medical incapacity
- Allows for a potentially successful contestation
- Does not always avoid probate
- Offers no tax benefits
- Provides little or no protection against creditors’ claims
Key elements of a trust
While trusts often require more complex paperwork, they generally take legal precedence over wills. They have a low degree of contestability, meaning the wishes of the client have a better chance of coming to fruition. Irrevocable trusts have the added benefits of providing tax advantages and protection from creditors.
Trusts become effective once the client signs the document, and they typically include provisions for dealing with medical incapacity and for avoiding probate court. They also preserve certain elements of privacy better than wills do.
The decision between a will or a trust or both comes down to a personal decision. Both documents can become important elements of a sound estate plan.