What’s the Difference Between a Trust & a Will
As part of our upcoming webinar on Trusts and Estates, we’re diving into the tools you need to build a solid estate plan. Two of the most essential tools are trusts and wills. While they both play crucial roles in managing the distribution of your assets, they operate differently, and understanding these differences can help you make informed decisions about your estate planning strategy.
What is a Will?
A will is a legal document that dictates how your assets will be distributed after your death. It allows you to appoint an executor to manage the process, name guardians for minor children, and outline specific instructions for the distribution of your property. However, a will is subject to probate, the court-supervised process that validates the document and oversees the asset transfer. Probate can be time-consuming and often becomes part of public record, meaning details about your estate may be accessible to the public.
Key Features of a Will:
Takes effect after death: Only comes into play once you pass away.
Requires probate: Must go through probate before assets are distributed.
Public: Probate proceedings, including the contents of the will, are public.
Covers assets in your name: Only assets solely owned by you are controlled by the will.
What is a Trust?
A trust is a legal arrangement that allows you to place your assets under the management of a trustee for the benefit of one or more beneficiaries. Trusts can take effect immediately (living trusts) or upon your death (testamentary trusts), but one of the major benefits of a living trust is the ability to bypass probate. Assets held in a trust can be transferred to your beneficiaries without court involvement, saving both time and money.
Key Features of a Trust:
Takes effect immediately: A living trust becomes active as soon as it’s established, and you can manage or update it during your lifetime.
Avoids probate: Trust assets bypass probate, speeding up the distribution process and keeping the details private.
More control: Allows you to specify how and when beneficiaries receive their inheritance, such as staggered payments or conditional distributions.
Maintains privacy: The terms of the trust are private and not subject to public disclosure like a will.
Trust vs. Will: Which One is Best for You?
During our webinar, we’ll dive into the specifics of who can benefit most from using a trust versus a will, but here’s a brief overview:
If you’re looking for simplicity and only need a basic document to distribute assets and name guardians for your children, a will may be sufficient.
If you want to avoid the costs and delays associated with probate, and value privacy and control over how your assets are distributed, a trust might be the better option.
Many estate plans combine both tools. For instance, a pour-over will can be used to cover assets that weren’t placed into your trust before your death, ensuring they eventually transfer to the trust and bypass probate.
Schedule a time to speak with our advisors to discuss your legacy planning. Go to https://www.taxfreeceo.com/calendar