How to Understand Wills and Trusts

Everyone has assets and no matter how small or large those assets are, when you die it is important to determine who will be getting those assets. In today's complicated economy it is important to make these decisions before something serious happens. There are two ways that you can bestow your assets upon your death – a will or a living trust.

Why do you need a Will or Trust?

Wills and trusts perform the same function, but how the beneficiary of the will or trust gets the assets is quite different. If you have neither a will nor a trust when you die, your assets will be distributed according to the laws and procedures of your state. This may not be how you would want your assets to be handled. Also, if the state is unable to locate family members to whom your assets may be divided, your assets –money, property, everything you own – will end up going to the government. So what is the difference between a will and a trust?

Wills

A will, much the same as a trust, bequeaths your belongs and assets to specified people. You can leave anything to anyone you choose; friends, relatives, business partners. The difference between a will and a trust is simply that a will must go through a state-run process called probate. The purpose of a probate is to make sure that the will is authentic and you did not make it out under duress. Probate also sees to it that all taxes, debts and any legal fees are paid for before the remainder is passed on to your heirs. A probate can take a year or more to process. In the meantime your heirs must wait for the government to finish with its business.

Trusts and Living trusts

A trust streamlines the probate process and is offers more confidentiality to the process. Probates are a publicly recorded process. A trust is set up and all assets are deposited in that trust before you die. You name an executor or your probate and that person will distribute your assets according to your wishes. There is no need for probate; therefore the time it takes to transfer assets to the executor and heirs is much shorter. Any property or financial accounts will have to be renamed in order to be part of the trust. The process of setting up a trust can be long and costly.