Whether you have built up a substantial estate or you’re just starting out in a career, there are significant benefits to putting an effective estate plan in place. There are ways to pass property to others without a will or a trust, but, in most instances, your first consideration will be which of those legal tools is best for you. Here are some of the ways that wills and trusts differ.
Wills – The Basics
A will is a written document that provides instructions for addressing your affairs after your death. As a general rule, the will names an executor (also known as a personal representative), someone legally designated to carry out the provisions of the will. Though wills are almost always used to ensure the orderly distribution of property, they can also include instructions regarding the payment of final debts, as well as provisions for the guardianship of minor children or any family member with special needs including the use of a Special Needs Trust (SNT). An SNT is one of any number of testamentary trusts which can benefit your family.
With a will, there’s no transfer of property until after your death. The distribution of property under a will must generally be supervised by the probate court—this is what is meant when it’s said that an estate must “go through probate.” In New Jersey the probate process is relatively simple and inexpensive so there is often no need for a “living trust” in order to avoid probate.
A trust is a separate legal entity, created to hold and distribute property. You can transfer property to a trust during your lifetime—an inter vivos trust—or upon your death—a testamentary trust which is established under the terms of your last will and testament.
One of the principal advantages of a trust is that you have already transferred property, so there’s no need to do so after death. Because you don’t technically own the property in a trust at the time of your death, that property is generally not subject to probate. Another benefit is that the assets in the trust can be used to benefit your loved ones the way that you see fit. For example, a trust can hold monies for a child until they are old enough to manage their inheritance themselves. An SNT can hold monies for the benefit of a child with special needs while enabling that child to receive governmental benefits. And an added benefit is that the trust does not go through probate so the contents of the trust can be kept more private.
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