A common question that clients ask when seeking the advice of an Austin Wills & Trusts Attorney is what the difference between a trust and a will is. The most notable difference between the two is that a trust goes into effect as soon as it has been created and a will only goes into effect after you die. Depending on your financial and family circumstances, you may choose to have one or both to handle the disbursement of your estate after your death.
The purpose of a will is to provide instructions on how to distribute your property and assets after you die. You will name your beneficiaries and what they will receive from your estate. When writing your will, you have the opportunity to choose an executor who will be in charge of managing the distribution of your assets. If you do not name an executor, the courts will appoint an administrator to act in that capacity. If you are a parent, you may also choose a guardian who would take care of your minor children in the event of your death.
A will allows you to express your wishes on how your property and assets will be disbursed. But one of the downsides to only have a will is that it may go into probate. When this occurs, the probate court may take several months to approve your will, especially if there are any objections or claims from creditors.
A trust is a legal relationship through a legal document where you can designate that a trustee holds personal or real property that will benefit your named beneficiaries similar to a will. You may choose to be the trustee and name a successor to handle the trust when you die, or you may decide to name a trustee while you are still alive.
The downside to naming yourself as the trustee is that you will be required to report any trust income on your personal taxes. The main reason people choose to make a trust is to avoid going through probate because the trust will own your assets and pass them along to your beneficiaries.
An Austin Wills & Trusts Attorney can help you determine whether a will or trust would be in your best interests.