Trusts and Wills are legal documents that are often grouped together, but they both serve different but essential roles in planning for the future and security of your estate. A Trust is a way to assign property and assets to someone else and to make arrangements around it that help you set your plans in place. In contrast, Will is a legal document that is crucial in setting things up for your estate after your death.
What is a Trust?
In a Trust, you can distribute your property while you’re still alive and provide for individuals from your estate. You can place an asset into a Trust, which managed by a Trustee who holds the legal responsibility for handling it, with assigned beneficiaries who can receive income from that asset or come into possession of it at a specific time or set date.
For example, you may wish for an asset to be placed into a Trust for a beneficiary to receive upon turning a certain age or life milestone.
A key feature of Trusts, is that they come into effect immediately and are designed to help manage your affairs while you’re alive. A Trust is also a way to manage potential life events such as injuries or disabilities or complex financial and family structures and relationships.
This makes it an important process in planning your estate, but it doesn’t replace a Will.
What is the difference between a Will and a Trust?
A Will is a legal document that outlines how your estate will be divided and distributed when you pass away. It’s a plan for the future, and only comes into effect after your death and is carried out by your appointed Executor. It can also include specifications for other areas such as the guardianship of dependants and any other final wishes. If you want to leave assets or property or any part of your estate to an individual, a charity or an organisation when you die, you would outline these actions in your Will by nominating them as beneficiaries.
However, if you would like these plans to be carried out immediately, you would create a Trust. By using a Trust, you can assign assets immediately and place them under the management of a Trustee.
In summary, a Trust is to manage and distribute assets while you are alive, and a Will is to manage and distribute your estate when you pass away. Both are important when considering how to plan your estate and ensure that your loved one’s future is secure and protected.
Disclaimer: The content of this blog is intended to provide a general guide to the subject matter. This blog should not be relied upon as legal, financial, accounting or tax advice.