One of the most important aspects of financial planning is determining how your estate will be handled after your death. While this is a topic most people would rather avoid, it is not an issue your or your family can afford to ignore. Two of the primary tools of estate planning are wills and family trusts. Both perform very different functions and offer unique financial and legal advantages.
Function
The basic function of a will is to dictate how your assets will be distributed upon your death. According to the University of Georgia, you also can use a will to pay your estate taxes, identify the executor of your estate and appoint a legal guardian for minor dependents. A family trust has a slightly different function. According to Trustmakers, a family trust can protect your family's assets and interests while you are still living as well as after your death.
Types
While there is only one basic type of family trust, there are a number of different types of wills. A holographic will is one that you hand-write. The validity of holographic wills varies by state, and you must meet your state's requirements for age, mental capacity and witnesses. An attorney draws up a statutory will in accordance with state guidelines. A joint will involves multiple assetholders. In certain states, you can draft your will orally.
Features
Wills and living trust feature specific elements. According to Trustmakers, a family trust has main components: the trust deed, the settlor and the trustee. The trust deed establishes the terms and conditions of the trust. The settlor executes the trust deed and transfers assets of the trust to the trustee. The trustee manages the trust and its assets. While the state guidelines for wills vary, wills typically feature a series of clauses that identify the assetholder, indicate the date, indicate the distribution of assets, identify the executor and minor guardian, direct the payment of debts or taxes and indicate the witnesses.
Benefits
Having a will or living trust offers numerous benefits. According to The Wealth Channel, the primary advantage of having a will is the control it allows you in naming your beneficiaries and executors and distributing assets. If you die without a will, the state is responsible for administering your estate according to probate law rather than your individual wishes. A family trust protects your interests in the event you become incapacitated and controls the transfer of assets to beneficiaries.
Considerations
It is important that a will or family trust meet the legal standards set forth by your state. While there are a number of resources available to help you create your own will or trust, you should consult an attorney if you have a particularly large or complicated estate. You should also be aware of what types of assets cannot be distributed through a will, such as life insurance proceeds or retirement accounts.
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