Difference Between Wills and Trusts
July 29, 2023
Wills and trusts are essential to estate planning as they protect your assets and your legacy. If you have started thinking about the management and disposition of your estate, you are likely wondering whether you need to create a will or a trust.
What is a Will?
A will is a document that instructs the distribution of your assets upon your death. A will allows your desired beneficiaries to receive your assets, along with providing any directions for actions required after your passing, such as appointing guardians for your children.
What is a Trust?
A trust is a document that arranges how your assets will be managed during your lifetime and possibly after your death. It allows you to transfer your assets to be held and managed by a third party, known as a trustee, for the benefit of your beneficiaries. There are many types of trusts, the most common being a revocable trust, which allows you to change the terms of the trust at any time.
What are the Main Differences?
Probate is a process supervised by the court to confirm that your will is authentic and recorded appropriately with the state, and it is the official process to distribute the assets in your estate. A will is subjected to the probate proceedings, while a trust is usually not. Assets within the will cannot be distributed to the designated beneficiaries until the probate process is completed, which can take months or even years. This means that the beneficiaries of your will would receive their benefits long after your passing. Your trust assets transfer on death, and the probate court does not normally get involved in its distribution.
Private vs. Public Record
As your will goes into probate, it becomes public record for anyone to see. People will be able to view how and to whom your assets were transferred, which may or may not be something you and your beneficiaries feel comfortable with. A trust on the other hand allows for the private distribution of your assets, with details only being known by you, the trustee, and the beneficiaries.
When It’s In Effect
A key aspect of a will is that it is only in effect upon your passing. Even if you become incapacitated, your will still does not go into effect until you have passed. A trust is in effect as soon as you sign the document and transfer the assets to the trustee. A trust allows the trustee to begin managing your assets immediately, so if you become incapacitated, the trustee can control your assets.
What Should I Choose?
Estate planning is different for every person as needs vary. Both wills and trusts have benefits that protect your assets in different ways. It is recommended that every individual have a will as a part of their estate planning. When deciding if you should also include a trust in your estate plan, things to consider can include: asset value, tax considerations, personal relationships, age of beneficiaries, etc. It is important to sit down with an estate planning attorney to discuss what is the perfect fit for you.
If you are ready to create an estate plan, contact Ball Eggleston today to speak to one of our experienced estate planning lawyers.