There are many Estate Planning options out there. Deciding on what you need, for your specific situation, is a critical part of your planning efforts. It’s so important, in fact, you may even feel overwhelmed at the thought of working through the process. But there are important aspects to each option – everything from slight nuances all the way to very significant differences – and understanding this is key.
So, what are the differences between a Trust and a Will? Knowing the ins and outs of each is imperative, so you can make decisions now that will ultimately make things easier on your loved ones in the long run. Keep reading, as we cover many of the questions you may have about Estate Planning. We’ll discuss:
While Wills and Trusts do have a lot of overlap, there are also several differences between the two. Ultimately, both are ways to say who will receive your assets. They just do it in different ways, and each has its own advantages and disadvantages.
One big difference between the two is in how and when they take effect. Wills don’t go into effect until you pass away, whereas a Trust is effective immediately upon signing and funding it.
It may be easier to think of a Will as a “simple” document. Wills allow you to:
Name guardians for kids and pets
Designate where your assets go
Specify final arrangements
While it is an easier process, the simplicity of a Will does come with some drawbacks. For example, Wills offer somewhat limited control over the distribution of assets. They also most likely have to go through some sort of probate process after you pass away.
A Trust is a bit more complicated, but can provide some great benefits. Trusts:
Offer greater control over when and how your assets are distributed
Apply to any assets you hold inside the Trust
Come in many different forms and types
Keep in mind that after you create a Trust, you also need to fund it by transferring assets to it, making the Trust the owner. This does make Trusts a little more complex to set up, but note that Trusts have one major benefit over Wills. They’re often used to minimize or avoid probate entirely, which is a huge plus for some people. This alone could more than justify the additional complexity of setting up a Trust.
Will or Trust – which is better?
When we’re talking about Wills vs. Trusts, we need to keep in mind that they have very different and specific benefits. It’s not really accurate (or helpful) to assume one is “better” than the other. You should start by assessing your situation, your goals and your needs at the very beginning of the process. Only then can you find the solution that best-suits and protects your family in the most appropriate way.
Can you have both a Will & a Living Trust?
Yes, you can have both a Will and a Living Trust. In fact, you probably should have both. There are many benefits to having a comprehensive Estate Plan that includes more than just a Will or just a Trust. But perhaps the biggest and most compelling reason to have both is that your Trust generally won’t ever be able to include everything. Another reason Wills are important is they allow you to name a guardian for your children, something a Trust doesn’t do.
Do Wills require probate?
Just because you take the time to create a Will, it doesn’t mean your estate will avoid probate. Probate is the process your estate goes through after you pass away if you haven’t done proper or comprehensive Estate Planning. It is a court-supervised proceeding, and depending on how solid your Estate Plan is, can be costly and take a long time.
However, there are many ways you can simplify, or even eliminate all together, the probate process. One of the most effective ways to make it easier on those you leave behind is by creating a Trust as part of your Estate Planning. Anything you put inside your Trust can be passed down while avoiding probate. And, a big benefit to having a Trust is distribution of assets remains private, whereas distributing assets through a Will and probate are public.
When do Trusts and Wills go into effect?
As noted earlier, Wills do not go into effect until the moment you pass away. In contrast, a Trust is essentially in effect the moment you sign and and fund it.
Wills After Death
Your Last Will and Testament takes effect once you pass. At that time, someone must notify the court to begin the probate process. The subsequent events that take place in effort to settle your estate and distribute property and assets can take a long time and be expensive.
Another (rather big) point to consider is that since your Will only takes effect after you pass away, if you become incapacitated and unable to make decisions for yourself, you have no recourse or plan as directed by your Will. On its own, a Will is essentially useless while you’re alive. This means a Will, on its own, is not an effective end-of-life planning tool.
Trusts Impact Life and Death
Because a Trust instantly takes effect as soon as you sign it, it can simplify the process for those around you. But it’s very different from a Will in that your Trust not only plans for after you die – it’s a document intended to have an impact while you’re still living. A Trust can set provisions for things like what you want to have happen if you become mentally or physically unable to make your own decisions. It protects loved ones from having to make decisions about the unthinkable. Most importantly, a Trust can make sure your wishes are known, during your lifetime and after you pass, so the stress of wondering what you would want can be completely removed from the equation.
Planning for the future is important on so many levels. But it’s not lost on us that the process can seem overwhelming – where do you even start?
There are a lot of pieces to the puzzle, and too often people think “I’ll get to it later…” That’s risky. If you become unable to make decisions on your own, and you haven’t put a plan into place, all that burden and stress will fall on your loved ones as they try to make decisions for you, hoping they get it right. Creating an Estate Plan is a true gift to your family and friends.
Fortunately, you don’t have to go at it alone. Trust & Will is there for you every step of the way. We’ll help you choose the right Estate Plan for your exact situation, with your goals in mind. Want to learn more about the differences between a Trust vs Will? Reach out today so we can help you make some of the most important decisions of your life. The peace you’ll gain from setting up your future is worth it, trust us.