At their core, wills and trusts are both estate planning tools people use to protect their assets and their families. These documents are generally thought of as the two primary means of protecting and distributing one’s assets upon death. Many estate plans contain both a will and a trust, despite the fact that the goal is for the majority of a person’s estate assets to pass through a trust. A common error people make, however, is believing that a will works the same way as a trust. What some people misunderstand is that these documents don’t always achieve the same goals. Essentially, a will is a legal document that spells out how you would like your assets distributed and your affairs handled after you die. A trust accomplishes the same result and also protects and holds assets for beneficiaries while they are alive. While establishing one document is better than nothing, a comprehensive estate plan may involve both, and it can save and protect you in the long run.
A will is a legal written document that provides specific instructions for your assets after your death. In a will, you can outline your funeral wishes, distribution wishes, and appoint a guardian for your dependents. The basic elements of a will consist of a named beneficiary, a personal representative (also known as “executor”), and other specific clauses. For example, you may be able to make a charitable gift, leave assets to a spouse, or even create a plan for pets after their owner’s death. The downside of a will is that a person’s assets will be required to go through the probate process, which can be burdensome not only financially, but also emotionally. The tragic fact of the matter is that your family is mourning your death while being forced to go through a lengthy court process for rights to your assets.
The other prominent form for estate transfers upon death is the use of trusts. There are many different types of trusts, but no matter the type, every trust is either revocable or irrevocable. Trusts can be created as part of a will or as a separate entity during lifetime. A Trust requires a trustor to appoint a trustee to handle the trustor’s assets during life and distribute them to their beneficiaries upon the trustor’s death. Often, the creator of the Trust (the Trustor) is the same as the person in charge of the Trust assets (the Trustee). Trusts include detailed instructions on how property and assets will be managed. There are additional steps to take when creating a trust and, therefore, it is sensible to consult with a will and trust attorney to finalize the details.
The Differences Between Wills and Trusts
The two main differences between wills and trusts are when they are applied, and how assets are distributed after your death. A will lays out your wishes for after your death, whereas a trust does the same and will affect you while you’re alive. An advantage of having a will or revocable trust is that both allow for flexibility, meaning you can amend or revoke them at any point during your lifetime as long as you are of sound mind. Other estate planning documents—like an irrevocable trust—do not allow for such adaptability. Although creating a trust is more extensive, wills may call for a longer, harder road than trusts do after your death because they require your assets to go through probate, a lengthy and expensive court process. Because wills are subject to probate (and probate is public record) they provide less privacy. A trust allows for more privacy in that regard by avoiding probate. Placing items in a trust allows for certain benefits and protections that wills do not—especially when it comes to taxes. Trusts also allow you to plan for mental disability by preparing your estate in the event you become incapacitated, not only if you pass away.
Which Option is Best for You?
If you already have a trust in place, you should have a bare-bones will as well. If you only have a will, you may be leaving a lot of questions unanswered after your death, which requires your family to pick up the pieces. A good will and trust attorney will tell you whether creating one or both of these documents is advisable, as the two documents serve different purposes. It’s important to note that a revocable trust will cost more money upfront than a will; however, when you consider the probate costs of administering a will on death, a trust may save money in the long run.
Regardless of the estate planning documents you choose—be that a will, trust, or combination—you can rest assured that your assets and your family will be better off than if you don’t plan at all. Consulting with a will and trust attorney is the best way to verify your documents are accurate and up to date. If you are considering creating a will or trust, contact our office today, or fill out the form below.