Now that you’re ready to create your comprehensive estate plan, you might be wondering what form your plan should take. New York State allows both wills and trusts as legal structures to pass your property to your surviving spouse and heirs. However, they might not be equal when it comes to protecting your assets or accomplishing your goals.
What’s the Difference Between Wills and Trusts?
Wills and trusts have a few things in common. For example, they both allow you to transfer property to loved ones at your passing, and both can be modified or revoked during your lifetime. The major difference between the two is the method in which property is transferred to beneficiaries.
A will, also known as a Last Will and Testament, is a signed statement that appoints an executor to oversee and coordinate the distribution of your assets after your death. It can also be used to name a guardian to care for minor children and include details of your funeral or memorial plans (such as your choice of burial method or where you would like your ashes scattered).
A trust is a document outlining a fiduciary relationship between your holdings and a party of your choosing. This party, called the trustee, will have the authority to handle your assets for the benefit of your beneficiaries. There are irrevocable trusts, which cannot be altered once they are created, and revocable (living) trusts, which can be changed by the creator at any time.
You Can Have Both a Will and a Trust
Many people agonize over the choice of wills and trusts so much that they put it off indefinitely—leaving the distribution of their assets up to the state. There’s really no reason for this since it’s entirely possible—and common—to have both a will and a trust. No matter what choice you make, it’s always better to have a plan in place than leave it up to the court.
Once you create a will, you may want to consider adding a trust to your estate plan if you:
- Want to avoid probate. Wills must go through the probate court process in order to be legally enforceable. Any property left by a will must go through probate, meaning it must be valued, inventoried, and approved for distribution by the court before beneficiaries can receive it. In contrast, property and assets that are placed in a trust pass outside of probate, minimizing both court costs and the time it takes to receive inheritances.
- Have privacy concerns. Probate is public, so leaving property through a will means that the details of your estate will become part of the public record. On the other hand, trusts are private documents that cannot be seen by any party not associated with the trust.
- Have a large estate. Trusts are often necessary to minimize taxes for people who have a great deal of property, high-value estates, or a lucrative business. A living or irrevocable trust is active the day you create it, allowing you to take advantage of tax laws immediately.
- Want to minimize legal costs. A well-made trust should significantly reduce the need for litigation after your passing. Trusts are legally binding and cannot be contested easily, giving heirs little choice but to accept their bequests according to your wishes.
- Are concerned about your heirs. If you have minor children, are concerned about your heirs’ spending habits, or have a large number of beneficiaries, a trust can give you greater control over how these funds are distributed. For example, you may choose to mete out a child’s inheritance rather than giving it all in a lump sum to prevent them from spending too much at once.
At Landskind & Ricaforte Law Group, our experienced estate planning lawyers can help you decide which method of passing on your property and protecting your loved ones is right for you. Contact us today through our online form to learn how we can be of assistance.