Understanding the differences between wills and trusts is an integral part of estate planning. When you begin the process of estate planning in Mississippi, you will likely assume that you need to create a last will and testament. A last will and testament is a foundational estate planning document that allows you to choose who will receive your assets after you pass away. Many people don’t know that creating a will may not be the best way for them to engage in estate planning. More people than ever are using trusts as a way to pass their assets on to their loved ones after they pass away.
Wills and trusts both allow you to distribute your property according to your wishes after you pass away, yet they offer distinct benefits. Every estate plan is unique, and an experienced lawyer will be able to advise you as to which type of estate plan is right for you. At Palmer & Slay, PLLC, we offer our clients will-based and trust-based estate plans. After carefully reviewing our clients’ cases and discussing their goals, we advise our clients on the best estate planning options. Contact us today to schedule an initial consultation to discuss your estate planning needs.
Wills and Trusts Are Useful Estate Planning Devices
Most people have heard the term last will and testament, and they understand that a will is a legal document that states how a person wants their property to be distributed after their death. Trusts are less commonly known and discussed, but their use in estate planning has become more prevalent than ever.
Gone are the days when only exceedingly wealthy individuals used trusts in estate planning. Now, people from all different backgrounds are using a trust to protect their assets and avoid the probate process. Both wills and trusts are essential estates planning devices, but they serve slightly different purposes and accomplish your goals by different methods. Additionally, both wills and trusts are subject to Mississippi law and must meet certain legal requirements to be legally valid.
What Is a Last Will and Testament?
A last will and testament is an important estate planning document that most people will use to distribute their property after their death. A will controls who will receive your property, who will manage your estate, and who will become the guardian of your children after you pass away. Only your probate assets are governed by your will, not assets that have a beneficiary designation or are held jointly.
The purpose of creating a will is to dictate who will receive your probate assets after you pass away. Without a will in place, you will have no control over who receives your property after you’re gone. Instead, the state will decide for you. When people pass away without a will, known as dying intestate, a Mississippi probate court will distribute their estate to their heirs according to state laws.
What Is a Trust?
A trust is a legal agreement that allows a trustee to manage assets on behalf of a beneficiary. When you create a trust, you appoint a trustee or trustees to manage the trust. You will also appoint a beneficiary or beneficiaries who will receive assets or property from the trust. To create a trust, you will need to transfer ownership of your property and assets from yourself to the trust. There are numerous types of trusts, but revocable living trusts are the most commonly used and the persons creating the revocable living trust usually serve as trustees and as beneficiaries. Assets owned by the trust are not subject to the probate process.
The Differences Between Wills and Trusts
A will becomes effective after the person who writes it passes away. On the contrary, a trust becomes active as soon as all parties sign the trust agreement. After the probate process is completed and the beneficiaries have received their assets according to the will, the will is no longer useful or necessary. Trusts, on the other hand, can remain in place and effective for years, providing asset protection and conservative financial management of assets for the beneficiaries. Another key difference involves the probate process. Beneficiaries need to petition the probate court to validate the will and distribute the assets to them. Trusts usually avoid the probate process entirely.
Avoiding the Probate Process
Avoiding the probate process is one of the key benefits of creating a trust rather than using a will for your estate plan. Property owned by a trust is not subject to the probate court’s jurisdiction. The beneficiary will not need to go through the probate process to recover the assets in the trust. Also, the probate process is public and often costly and time-consuming. Instead of requiring your beneficiaries to wait for the probate court to distribute assets to them, you can ensure they receive assets immediately upon your death through a trust.
There Are Many Different Types of Trusts
Wills are limited in terms of their power and reach. By creating a will, you can appoint a legal representative to enforce the will, distribute your property, and select a guardian for your children when you pass away. Trusts are much more flexible in terms of how they operate. You can choose to set up your trust so that your loved ones receive the assets in the estate immediately after your death. You can also choose to keep all of the assets in the trust until your beneficiary reaches a certain age or meets other specific requirements. There are many different types of trusts, each of them fulfilling a particular purpose, such as:
- Revocable living trust
- Irrevocable trust
- Pet trust
- Special needs trust
- Testamentary trust
- Irrevocable life insurance trust
- Charitable remainder trust
- Asset protection trust
Contact an Experienced Estate Planning Lawyer
The best way to determine whether you would benefit from a will or a trust is to speak with an experienced estate planning lawyer. With simple estates, creating a will may be sufficient. In other cases, you may benefit from creating a trust. Everyone’s situations and goals are unique and the experienced lawyers at Palmer & Slay, PLLC, will advise you as to your best options. Contact us today to schedule your initial consultation.