Being prepared for the unexpected is a very important aspect of being a parent. All parents want to look out for the best interest of their child in the event that there is an unexpected accident that impacts the family. Setting up a will or living trust is essential, and knowing the difference and what is best for your family will help protect your children in case of an emergency.
Sonja Panajotovic, estate and tax attorney, explains the difference of a living trust and a will. Essentially, the living Trust and the will are very similar, but the will requires a probate period. The two documents essentially mean and say the same thing, although the living trust is a recognized way to avoid probate. Depending on the assets of the descendent, the estate will need to go through probate if there is only a will set up. She recommends setting up a living trust because the probate process can be costly and can take from six months to a few years to resolve.
Many parents wonder if they actually need a living trust because they believe trusts are only for wealthy people. However, this is a common misconception. Panajotovic actually believes trusts are more important for people who do not have significant assets because the children and beneficiaries will need to access as many funds as possible. A living trust allows avoidance of lawyer’s fees, executor’s fees and court fees, allowing beneficiaries to receive more of the funds.
Five important things to remember about wills and living trusts include:
- A will and living trusts are very similar.
- A living trust does not require a probate period.
- A living trust is more cost-effective than a will.
- A living trust allows beneficiaries and children to access money and assets quicker.
- Funds with beneficiary designations such as retirement plans and life insurance policies are not held in trust.
Understanding the difference between a will and a trust allows parents to make educated decisions in protecting their children in case of accident or emergency. Parents should implement a legal plan of action to protect their children and to designate assets to a trusted person who will care for the children in the event of an emergency. Living wills and trusts should be discussed with a legal professional for accurate legal information and recommendation.