Welcome to a new episode of Woke Wednesdays in Real Estate, where we’ll discuss the terms “will and “trust” as they’re often confused. One main difference between a will and a trust is that a will goes into effect only after you die, while a trust takes effect as soon as you create it.
When it comes to trusts, there are many types but it’s also important to address the issues that you may have to encounter in your estate plan.
We are going to divide trusts in 3 categories: revocable living trusts, Irrevocable living trusts and testamentary trusts.
1- Revocable trusts are those where someone creates the trust and funds his property into it. The trust’s terms can be changed during the individual’s lifetime.
2- Irrevocable trusts are pretty much the opposite, as once they are created they stay forever. It works basically this way: when you fund an irrevocable trust you place the property into the hands of someone else you’ve chosen as trustee. Once you’ve made this decision and created an irrevocable trust, you can’t take it back.
Why do people go for irrevocable trusts then? Well they bring in many great benefits such as very interesting tax implications that are worth to be taken into account and plenty of other benefits that anyone with great financial situation should consider.
3- Testamentary trusts: they are created by a testator and they don’t come into action till the death of the testator.
So, now you must be wondering: When do Wills and Trusts take effect?
Well, as we just mentioned, a last will and testament will be applied after the testator’s death and any living trust will come on the scene once the papers have been signed.
A will can only govern the disposition of property owned in your sole name at the time of your death, including interests you might have in property such as a tenancy in common.
A living trust can govern and distribute any property it’s been funded with. The grantor transfers his assets into it after it’s formed.
So that’s all for today, hope you found this article useful so far and don’t hesitate in reaching me out if you have any questions or need a consultation.
Stay hungry and stay positive!
Make it a great day,
Sean La Rue