What’s the difference between and will and a trust?
One question that many clients ask me is whether they need a will or a trust. While estate plans are unique to every person’s needs, a will and a trust are not mutually exclusive. It is possible, and common in many instances, to have a will and a trust. Think of them being more similar to peanut butter and jelly than Pepsi and Coke.
Why would someone want a trust?
Think of a trust as a separate entity that isn’t attached to a particular person. A family business, for example, has some of the same characteristics as a trust. A trust can survive and carry on after the grantor’s (the person who establishes it) death. If you had small children that you wanted to provide money for after they reached a certain age or if they should graduate from college, a trust allows you to do that. If you had investments or assets that you wanted a bank or a trusted friend or relative to manage for your loved ones should something happen to you, a trust is also a great way to accomplish that.
Why should everyone have a will? A will is the cornerstone of an estate plan. It acts as a safety net to make sure that all of your wishes are considered upon your passing. To use a baseball analogy, trusts, insurance policies, CDs, IRAs, bank accounts, beneficiary deeds, transfer on death designations, stocks, bonds, and other financial accounts are like catchers. They are most likely going to stop every pitch that’s thrown. Your will is like the backstop. If your catcher misses the ball, the backstop is always going to stop the ball.
It is always a good idea to have a will. If your trusts or beneficiary designations fail for some reason, your will always makes sure that your property gets distributed to who you want it to go to through a probate court. When I draft trusts for clients, I ALWAYS advise them to get wills as a backup plan.
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