Introductory Information About Wills and Trusts
Wills and trusts are the cornerstones of the estate planning process. Wills and trusts are both legally binding documents that an individual uses to direct the distribution of his or her assets after death.
Without strong and sensible wills and trusts, the assets that you worked so hard to accumulate could be lost to estate taxes or attorney fees, or your assets could be distributed in ways that do not mirror your intentions.
The Difference Between Wills and Trusts
Wills are the most common type of legal document with which people dictate their wishes for distribution of assets after their death. Wills may also be used to appoint a guardian for minor children in the event of both parents’ death.
Wills range from simple one-page documents to complex volumes, depending on the size of the estate and the wishes of the person making the will (called the testator). A well-constructed will includes a strong no-contest clause, to help prevent costly estate litigation after the death of the testator.
Trusts are becoming a more common estate planning tool. One of the main differences between wills and trusts is this: a will can only dictate what will happen to assets after death; the purpose of trusts, on the other hand, is to manage the distribution of property and assets both during a person’s lifetime and after death. In some ways, trusts are more flexible than wills, which is one of the reasons for their increasing use as an estate planning tool, especially among higher-income families. Common types of trusts include revocable trusts, irrevocable trusts, living trusts and testamentary trusts.
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