Preparing for the future, especially when it comes to managing assets after death, can make people hesitant to begin the process because they are unsure of where to begin or because the subject of death makes them uncomfortable. However, making such arrangements can ease certain financial burdens for loved ones in the future, and the North Carolina Judicial Branch notes that some property can pass to heirs instantly without the need for probate when all people prepare legal documents ahead of time.
Wills and trusts are the two most common types of legal instruments and those who want to make financial arrangements for the future may want to understand the differences between the two before they proceed.
What is a will?
Most wills make provisions for the heirs of an individual after that person passes away. In most cases, the will includes information about the division of assets and properties, including:
- Savings and retirement accounts
- Vehicles
- Real estate
While the presence of a will can assist those who have a valid claim on any assets or property, those named may have to appear in court if the will goes into probate, which validates its legality.
What is a trust?
Unlike a will, trusts make provisions for a person’s heirs while that individual is still living. People often set up trusts for minors, those with special needs and to help their heirs avoid probate and other court-related entanglements. The trustee manages the assets, who holds them for another until the heir is old enough to receive them.
Trusts may also assist with reducing taxes on certain gifts and assets. Those with larger estates may want to consider creating trusts to assist their heirs in reducing or avoiding such problems.