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If you’ve been thinking about creating a trust or a will, you may be wondering which one is right for you. If you don’t know the answer, rest assured – you’re not alone. As a matter of fact, many people wonder about this when starting their estate plan. The truth is, it depends on your individual circumstances.
Wills vs. Trusts
You can plan for your estate with both a will and a trust, but they each serve slightly different purposes. Let’s take a closer look at how they work, their similarities, differences, and a quick reference for when you might use one vs. the other.
In general, a trust is used to manage assets during your lifetime, if you become incapacitated, and after your death, while a will is used to distribute your assets only after you pass away. If you know what you need, start your estate plan now. Otherwise, keep reading to learn more.
The Details
A will is a legal document that outlines how you would like your assets to be distributed after you pass away. It also includes instructions on who should take care of your children or pets. It can provide you with peace of mind knowing that your wishes will be respected and your family will be taken care of when you’re gone. When creating a will, you assign an executor to carry out the terms and oversee the probate process, ensuring that your wishes are respected.
A trust, on the other hand, is a fiduciary arrangement that allows a third party to hold and direct the creator’s assets in the trust fund. Trusts can provide peace of mind by protecting your assets and ensuring they are distributed according to your wishes. You can be more specific about the distribution of your assets, including how, when, and to whom. This arrangement allows you to have greater control over your assets while also providing for your loved one’s future.
Similarities
Both a will and a trust are legal documents that outline how you want your estate to be managed. Both allow you to name a guardian for your minor children, make plans for your pets, manage your digital assets, leave inheritances, and make charitable donations. In addition, both a will and a trust allow you to make your final arrangements known so your loved ones don’t have to make difficult decisions on your behalf. Both a will and a trust provide peace of mind by ensuring things go according to your plan and help to provide much-needed clarity to family members during a difficult time.
Differences
The main difference between a will and a trust is that a will goes through probate, where the judge decides who gets what. When you use a trust, you actually – legally – transfer your assets into the trust, which avoids probate because the trust is the owner, not the creator of the trust. With a trust, the person nominated (trustee) can access the grantor’s (creator of the trust) assets before their death, for example, when they become incapacitated or unable to make their own decisions.
While a trust is more complex and involves more time and effort upfront, it does allow you to achieve multiple objectives that a will simply can’t. A trust can save money by avoiding probate, which is a time-consuming and costly process of distributing your assets in front of a judge. Whether the efforts of setting up a trust make sense depends on your situation and how you weigh the benefits for your specific needs.
A will is a simple way of making decisions regarding your assets, but it does have it’s limitations. Because it is a single document that becomes effective once the creator is deceased, it’s more likely to end up in probate court. This can take months to years and often delays the distribution of finances and assets, and can be quite costly.
A will allows you to:
- State all your assets and liabilities.
- Designate who will receive your assets.
- Express wishes regarding donations.
- Name a guardian for your children who are under the age of 18.
- Name a guardian or shelter for your pets.
- Design final arrangements for your funeral.
- Pick an executor to carry out the terms of your will.
A trust allows you to:
- All of the above plus:
- Leave very specific instructions about who gets what and when.
- Plan for the possibility of your own incapacity.
- Prevent your financial affairs from being made public by avoiding probate for the assets that are added to the trust.
In short, the main difference between a will and a trust is that a will goes through probate, while a trust does not, and a trust allows greater control over your belongings. Because a trust requires the legal transfer of your assets into the trust fund, there is some additional work on the front end, and it’s ultimately your decision on which feels right for your particular circumstances.
The GoodTrust Difference
Making an estate plan should be everyone’s priority. Whether you create a will or a trust, it’s never too early to start. At GoodTrust we make it simple – we believe that everyone should have access to all the tools needed to protect what matters which is why we have just one smart plan that includes both a will and the trust so you have the flexibility to update your plan as life changes. Additionally, our one plan can be used for each adult family member at no additional cost. Get started today and protect the future of yourself and your loved ones.
Reprinted with permission from MyGoodTrust.com.
