Wills vs. Trusts: Which One is Right for You?
There are many documents that can be executed as part of a comprehensive estate plan. However, wills and trusts are integral to planning efforts, but each has a distinct purpose. Whether you need a will, a trust, or both depends on your specific situation.
It’s vital to know the difference between a will and trust. Understanding the difference will help you truly understand the importance of a well-rounded estate plan for you and your family.
For more than 26 years, Steven H. Peck has been helping clients in estate and tax planning. If you need experienced and reliable counsel in Cook County, Lake County, DuPage County, McHenry County, or anywhere else in Illinois, reach out to an estate planning attorney at The Law Office of Steven H. Peck, Ltd.
What Makes Estate Planning So Important?
The importance of estate planning should never be underestimated. Estate planning allows you to make critical decisions about what happens to you if you become unable to take care of yourself. It also allows you to decide what happens to your assets when you die, and ensures that when you die, you will not be leaving a legacy of chaos that your loved ones are forced to deal with.
Every adult should have some sort of estate plan in place, Moreover, they should keep that plan updated as things change in their lives. Estate planning is not just for the elderly, the terminally ill, and the wealthy. It is for everyone.
What Should I Know About Wills?
A will is a testamentary document or codicil, which is the legal term for revisions incorporated into a prior will. In a will, you appoint the person you want to administer your will, known as an “executor.” You can revoke a prior will. You can name your choice of guardian for a minor child. You can specify how you want the proceeds of your estate distributed and in doing so, can exclude those who otherwise have an heirship right to benefit from your estate under the law of intestate succession.
There are simple wills, which specify your wishes regarding the distribution of your estate. Pour-over wills are often executed in association with a living trust to ensure that anything not included in the trust is addressed. There are wills you execute for your own estate as well as joint wills executed by couples. Keep in mind that wills allow you to name the person your preference for a guardian of a minor child, which you cannot do in a trust.
Among the drawbacks of a will is its public nature. Wills must be probated because they are filed with the court, and the contents and terms are matters of public record.
What Should I Know About Trusts?
In a trust, you transfer your assets from your ownership to the ownership of the trust. Those assets are managed by the trustee you name. In most cases, you serve as the trustee and name a successor trustee who assumes this role if you are unable or unwilling to carry out the duties, including upon your death.
Living trusts may be revocable or irrevocable. Revocable trusts may be changed while you are alive while irrevocable trusts may not. For example, you cannot change the beneficiaries of an irrevocable trust or move assets in and out of the trust.
A testamentary trust must be accompanied by a will and only goes into effect upon your death. These trusts provide a way to time distribution of your estate to beneficiaries of your will. For example, you can have a minor child’s inheritance held in trust until that child reaches a certain age.
The advantages of a living trust are many, especially irrevocable trusts—notably, tax advantages for you and for the beneficiaries of the trust. That is because you do not personally own those assets. The trust does.
Another major advantage of trusts is privacy. Living trusts, unlike wills and testamentary trusts, are not subject to probate. Probate is only responsible for administration of personal assets of an estate. Since living wills are not probated, their terms, beneficiaries, and distribution remain confidential.
There can certainly be drawbacks to trusts. For example, you cannot name a guardian for a minor child in a trust. You also cannot change an irrevocable trust once you execute it.
How Do I Know Which One Is Right for Me?
There are many considerations you need to weigh in choosing whether you need a will, a trust, or both. They include such issues as assets and debts, heirs and beneficiaries, the desire to name a conservator or guardian, the type of legacy you want to leave, and a wealth of tax considerations.
You don’t need to know everything about estate planning to make critical decisions. Instead, reach out to an experienced state planning attorney who can help you explore your options, weigh important factors, and craft a plan that will benefit you and those you love.
Turn to Trusted Legal Assistance
Estate planning can be frustrating if you try to do it alone. Reach out to an estate lawyer instead. Steven H. Peck approaches each estate plan with care and consideration, recognizing the highly personal nature of a legacy. If you are ready to begin your estate plan or want to review and update an existing plan in Cook, DuPage, Lake, or McHenry County, Illinois, call The Law Office of Steven H. Peck, Ltd.