When preparing to create an estate plan, you have a lot on your mind. For starters, you have decisions to make regarding administration of the plan, questions about how it all works and reservations about the entire process.
You have heard of wills and trusts and may have always thought of them as the same thing. However, major differences exist between these two types of estate documents, from what their purposes are to when they go into effect.
Different types of trusts
While there is only one type of last will and testament, a few different types of trusts exist. Knowing which one to choose will differ based on your individual situation. The most common type of trust allows the grantor to move assets and property in and out of the trust throughout life. When you choose to move something into the trust, it is there forever. Only the grantee or trustee can access the property and move it.
A grantor sets up this type of trust at the same time as a will. It outlines the terms of a trust that becomes active upon the grantor’s death.
The timing of wills and trusts
A will goes into effect at the time of death. The executor must follow the will’s directives and administer property, debt and assets as iset forth. A trust, in most cases, goes into effect instantaneously. The terms and conditions of the trust become official upon signature.
The party creating the will and trust may change either or both up until the time of death. However, heirs or trustees may challenge these changes if they occur in the face of failing mental health.
When creating an estate plan, considering if adding a trust to your will is up to what you hope to achieve. Knowing the difference between the two types of documents can help you come to a reasonable decision with the help of a professional.