Almost everyone has heard of these estate planning tools: will and trust. Both of them are used to pass on assets to your beneficiaries. While it might seem like a will would be better for you, at other times you might prefer to create a trust… or maybe both?
But before we get to that, what exactly are these tools?
A will is a legal document that allows you to express what happens to your estate after you pass on. A trust, on the other hand, is a legal entity that holds your estate and allows your trustee (you can be the trustee too!) to manage it while you’re alive and after, based on the instructions you leave.
Before you decide what’s best for you, here’s what each of them can do –
What Can You Pass On
For assets to pass through your trust, you need to add the property you wish to transfer to the trust. A will, on the other hand, allows you to pass on all assets in your name.
Guardianship of Children
A trust functions only for your assets and does not allow you to assign guardians for your children. To name guardians for your children, you will need a will to be able to do so. Additionally, you can disinherit your children or a spouse through your will.
Ease of Creating It
A trust is relatively complicated to create and generally requires professional help throughout. Wills are easier to create and can be made by yourself, although it is still recommended that you consult a lawyer.
Cost of Making
A trust is more expensive to create and manage, whereas a will is relatively cheaper. Although, in some states, it might get a little expensive if the will has to go through a lengthy probate.
When is it Effective
A trust becomes effective immediately after you create it. A will, however, is implemented only after you pass on.
How Private Is It
A trust ensures that all content within it and the proceedings of it is absolutely private. A will needs to be recorded in court, and therefore, becomes public after you pass on, allowing anyone to access it. While some find this advantageous, others find it invasive.
A trust helps you avoid probate. A will, however, has to go through probate court. Thankfully, in most cases, the probate court is not as complicated as it seems.
Security After Passing On
The management of a trust passes on from you to your successor automatically after your demise, privately. This means, there is no court supervision. For a will, on the other hand, your wishes are carried on by your executor with the probate court overseeing the process.
So, now that you are familiar with the major differences between a will and trust, based on your situation and needs, you might already have an idea about which option is best for you – a will, a trust, or both.
The answer to this is not universal.
It is generally suggested to have a will and at least one trust for your estate. This, however, depends on various factors like your need, budget, privacy, time constraints, etc. And so, before you decide on which option is best for you, it is wise to consult with an attorney.