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When you contemplate leaving property to your beneficiaries, you may think that the only way to do so is by drafting a will. While this document benefits some families, others choose to establish a trust instead. If you are unfamiliar with either of these legal documents, the information below will help you understand the difference between them.

What Is a Will?

WillA will explains how you want your assets divided and other affairs—such as paying debts and taxes—settled after your death. The will can direct certain belongings—for instance, a beloved piece of furniture or an heirloom accessory—to a particular friend or family member. It can distribute the contents of a bank account between one or more people, and it can even assign guardianship of your minor children.

In New York State, a will is subject to probate if its value exceeds $30,000. Probate is a court-supervised process where a judge approves the will and distributes assets and property to the deceased’s beneficiaries. This can take weeks or months, depending on the size of the estate. However, if the will includes a 401K, an insurance policy proceeding, or a retirement account, they will not be subject to probate. Finally, it’s important to note that once a will proceeds with probate, it becomes part of the public record.

What Is a Trust?

Like a will, a trust is a method of estate transfer. Unlike a will, which does not take effect until you die, you can enact a trust either after your death or during your lifetime. By doing so, you entrust a third party—the trustee, who can be a friend, a relative, an attorney, or even a banker—to handle finances for your beneficiaries. To be valid, the trust must also include a successor trustee in case the first trustee can no longer fulfill the duty.

A trust is often used to transfer property, cash, or business to minor children, and the trustee manages the financial affairs until they come of age.

The primary benefit of a trust over a will—aside from being able to transfer property during your lifetime—is that trust property is not subject to probate court. Trusts also usually remain private.

Solid Estate Planning may require both documents as some assets may not be capable of being placed into a trust (such as a residence encumbered by a mortgage or future asset not yet realized).  In any event, many Estates will benefit handsomely from some pre-planning.  Our goal is to simplify wherever possible but, most importantly, ensure that our client’s wishes are respected.

 

 

To draft a will or a trust for your beneficiaries, contact Pelkey & Pelkey, PC in Rochester, NY. The firm serves clients throughout Monroe County, specializing in estate planning, healthcare proxy and living wills, and small business and property matters. Visit their website to learn more about their services or call (585) 544-3440 to schedule a consultation.

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