As you take your first steps towards estate planning, you may begin to wonder whether it’s wiser to bequeath your estate through a will or a trust. After all, both processes allow you to pass assets down to your descendants. However, wills and trusts do not guarantee the same legal and financial protections. Therefore, be sure to research both before settling on a final decision.
A will directly spells out who receives your assets when you pass away. Your estate then passes into probate where a court rules on the validity of the will. A trust, on the other hand, does not have to go through probate, allowing you to save time and money on court fees and rulings.
Continue reading to understand how a will and a trust compare, what sets them apart, and which of the two is better. For more advice on setting up a trust, reach out to Sim Gakhar in Ontario, Canada.
Both wills and trusts are established to guarantee that your estate is protected and passed down to your rightful heirs. Under current Canadian law, it’s typically easy to pass your estate to a spouse but passing assets down to your next generation can sometimes hit a few roadblocks. These two processes help smooth things over.
A will, or—more formally—a testamentary will, is a legally binding document that specifically delineates who receives your property, wealth, and assets after you die. Recipients can include your children, spouse, friends, distant relatives, and even charities. Wills typically include a list of information along with the desired recipients, including:
Wills essentially act as a direct estate transfer from one person to another. They are legal transactions that must be verified by the court and, as a legal transaction, transferring your estate through a will establishes your assets as part of the public record.
Wills also allow you to disinherit your children if you deem them unfit to oversee your estate. If you wish to disinherit a child, speak with an expert who can explain the local provincial rules regarding disinheritance.
If you pass away without a will and testament, your assets will be overseen by the state and distributed according to a specific formula set by the court. You may have to pay taxes on your estate, depending on its total value.
A trust is a fiduciary relationship that allows you to transfer the responsibility of your estate to a third party. That third party is then responsible for distributing your estate according to the terms of the trust. Trusts can be established in one of two ways—living and testamentary trusts.
Living trusts are created before your death and are revocable under certain circumstances. They allow you to transfer your estate after you die but the terms of the trust can be changed as long as you are alive and you remain the proprietary owner of the trust. After death, the trust then takes effect and begins transferring your estate outside of probate court.
Testamentary trusts must be declared prior to death but cannot come into effect until after you pass away. They must include a specified trustor, trustee, successor trustee, and beneficiaries. As with living trusts, testamentary trusts allow you to pass assets on to an heir without going through a probate court.
First and foremost, trusts keep your descendants out of probate court. Depending on the size of your estate, your family and heirs could spend weeks, months, and even years in probate court, fighting to access an estate that’s rightfully theirs. By the time your estate escapes probate, it could diminish by as much as 3-5%.
Probate court was specifically designed to investigate your estate and settle wills, conservatorships, trusts, and guardianships. After you pass away, the court will examine all of your documents, assets, and debts, and determine how the estate should be divided, based on your wishes and financial obligations. However, as with all court proceedings, probate can take time and effort, all of which cost legal fees.
Therefore, although a will specifically delineates who should receive your estate, it can get caught up in the backlog of other legal proceedings and leave your family without access to your estate.
If you’re hoping to transfer your estate quickly and seamlessly, a trust can expedite the process and keep your family out of probate court. Additionally, trusts allow you to keep your assets private, whereas a will establishes your estate as part of the public record. Therefore, if you’d prefer to keep your investments private, we recommend establishing a trust.
This isn’t to say that wills are useless, though. If you wish to name a guardian for your child or disinherit a child entirely, wills are more suitable. Additionally, wills are the ideal legal document for expressing your final wishes for burial and any last words of farewell. Even if you establish a trust, we recommend also writing a will to cover these final responsibilities.
You are legally allowed to establish both a will and a living trust. They are separate legally binding documents that—99% of the time—do not interfere or trump the other. However, if your will and trust come into conflict, your trust will most likely override the will.
Trusts often have an image of only belonging to the super-wealthy. This is entirely fictional. Even average middle-class families can establish a trust to pass on their estates to their descendants. Although trusts are more expensive than wills, they are still well within the price range of most average Canadian families. Speak with an advisor today to learn how you can establish a trust.
Estate planning doesn’t have to be so hard. Contact Sim Gakhar in Ontario, Canada to start setting up your own living trust. Sim is a licensed insurance agent and investment advisor who can guide you on how to plan for your future and prepare for the next generation. Don’t leave your estate lost to probate court! Contact Sim and found your trust today.
My husband and I had the pleasure of getting our life insurance through Sim Gakhar. She is professional, attentive, detailed-oriented and knowledgeable. Sim is reliable and trustworthy – from selecting the right product to providing medical records and payment process – she made it super easy. She is punctual and flexible – she always came to our home at our schedule. She ALSO helped with closing one of our older insurance policy that wasn’t working for us. We highly recommended Sim, she is definitely one of the best in the industry.
Tharmila RajasingamCo-Founder | Realtor
Sim helped me and my wife replace existing Life Insurance and Critical Illness policies that weren’t meeting our needs. Her knowledge of Canadian Insurance policies and providers is excellent. Her approach was very consultative, ensuring that she understood our situation & goals, and never overselling. We were presented with several options and given time to make the best selection. Her relationships with coverage providers ensures that the process goes smoothly. I highly recommend her.
Jim MonteathIT Consultant
It has always been a pleasure conversing with Sim. She is always available, and always happy to provide you the best solution to suit your needs. One thing that makes Sim outstanding at what she does is her deep understanding of various products and how they fit within the goals of the client. It has truly been amazing 6 years since I have known Sim. Not only have I received appropriate coverage, but also was able to set up a plan for the estate. Thanks, Sim, and to anyone looking for a financial advisor or an estate planner or have any insurance needs, Sim is the person to go to. Thanks, Sim.
Sim helped us with a life insurance policy. Her communication systems and processes and her ability to stay in touch, explain things, and move things along is as professional and streamlined as I’ve ever seen. She was an absolute pleasure to work with and has helped our family secure our financial future!
Jonathan CarterCPA | CMA
Sim has been our go to person for insurance over the last 11 years. She is nothing short of professional, caring and always looking out for our best interest. The great thing is she will always be available to answer questions and provide insight on how the decisions you make today, will impact your future tomorrow.
Sim is a thorough and learned professional. It was a great experience working with her, to get customized insights, advice in making my insurance and investment decisions. She handled the end-to-end process with ease, especially during this challenging time, and went the extra mile so I could complete everything remotely. I would definitely recommend her and look forward to working with her for future investments.
Manav GhaiSenior Product Manager
Sim is a very knowledgeable and experienced professional not just for excellent & creative insurance solutions but probably the best financial planner that you will ever meet. We have known Sim for almost the past 2 decades and all we can say she conducts her business with integrity.
Neil RamchanderSales Manager
Sim is extremely knowledgeable, patient and helpful. She helped us to put together a plan that suited our needs very well. I think we were very lucky to find Sim.
Rick MateljanPrincipal Owner
I had the pleasure of working with Sim on selecting the best life insurance policy fo me. I had met with several advisors prior to meeting Sim and she definitely stands out as one of this best in the space! It’s very refreshing to see how she personalizes her approach to each person/product and makes sure you are well informed and comfortable before making any financial decisions.
She is constantly learning and paying it forward through her involvement and leadership in international community events. I am confident that Sim will help me make decisions in my best interest and I am excited to work with her in the future!
Sanveer DhanjuProduct Analyst
Sim is very knowledgeable and experienced person who not only help me with my life insurance and retirement planning needs, but also help my clients with their tax and retirement planning needs on very timely basis. I highly recommend her if anyone needs insurance and investment advice.
Olga Sokolova CPA, CA, LPA
Helping business owners and self employed professionals grow retained earnings tax-free, pass more wealth to the next generation, and protect their biggest asset – themselves, the key person of the business.
When it comes to life insurance there really is no time that is too soon to get covered. And, this is because the younger you are, the cheaper those premiums are going to be. Not only this, but you are probably healthy right now.
If you wait until something bad happens, you will not only without a doubt face higher premiums, but you might not even be able to get covered at all.
Copyright © 2022 | Sim Gakhar