Both a trust and will are important aspects of estate planning. These documents can help you ensure that your assets are protected and given to your children or other heirs. While your wealth and assets will be passed down to your surviving spouse, the process is more involved when it’s passed down to your heirs. Keep reading to learn everything you need to know about trusts and wills.
What is a Will?
A will is a legal document that is part of your estate plan. It expresses your wishes after you pass away. This can include passing down your wealth and assets to naming guardians for your children. Your will becomes active only after your death.
There’s also something called a living will, which affects you while you’re still alive. It gives instructions regarding your medical care when you cannot communicate your wishes on your own.
What is a Trust?
A trust becomes active the day that it’s created. As a grantor, you can list the distribution of your assets before your death. These assets will then be placed in a trust and owned by the trust. Irrevocable trusts are a type of trust created for tax purposes. These documents cannot be changed after they’ve been made. Living trusts, however, can be changed by you as the grantor.
What Are the Main Differences Between Trusts and Wills?
There are several differences between a trust and a will. Let’s explore these differences below.
The most significant difference between a trust and a will is that wills must always go through a legal process called probate. Your heirs will go to probate court, where a judge will examine the will. The probate process can be long and difficult, especially if family members contest the will.
Trusts, unlike wills, are not required to go through probate court when you pass away. They also cannot be contested.
Guardianship of Minors
A will focuses more on the people you love more than a trust. Trusts don’t have anything to do with who gets guardianship of your children if you pass away. On the other hand, a will allows you to have a say in who will raise your children and even take care of your pets.
A will can also allow you to specify funeral arrangements, including whether or not you’d like to be cremated or where you’d like to be buried. A trust does not do this since it only controls your assets, not what happens to anything else after you pass away.
A will only determines the disposition of the property that you own in your name at the time of your death. This property can include interests that you have on a property. A will, however, cannot address assets that pass directly to a beneficiary by a contract, such as your life insurance policy. It also gets complicated in the process of a move, but that’s a whole new story.
A living trust allows you to decide which property goes to whom based on what’s specifically mentioned and put into the trust. You, as the grantor, transfer your assets into the trust after it is formed. Unlike wills, a living trust can include life insurance policies if the trust owns the policy instead of the grantor.
Who Makes Your Decisions When You Can’t
A will cannot help you plan for a mental disability because it can only go into effect once you pass away. Your heirs would have to go to court to request that a guardian be appointed to handle your affairs and make your decisions in the case that you no longer can. This guardian is also called a successor trustee and will be someone of your choosing instead of the court deciding who makes your decisions for you.
Creation and Revisions
Wills are the easiest documents to draft because they don’t require any particular legal language. To execute your will, only you and two witnesses need to sign it. Witnesses must be two people who will not be receiving anything under the document.
Similar to wills, there are no laws that require trusts to have complicated language. However, because trusts must cover specific duties of the trustee, they are typically more complex than wills. Instead of having witnesses, trusts are signed in front of a notary public. You must then also take the additional step of transferring your property into the trust.
Both wills and trusts can be revised, but only if the trust is a revocable trust like a living trust. An irrevocable trust cannot be changed in any way once it goes into effect.
Public Records Vs. Private Records
Your will is a matter of public record, which makes it easily accessible to any family members or any member of the public, which can create friction among your heirs. In addition, anyone who disagrees with your will after reading it can contest the will in court, which is a lengthy and potentially expensive process for your family.
A trust, however, is a private record so that you can ensure no one else reads your legal documents or tries to fight your family members in court.
Will vs. Trust: Which is Best?
A trust will help your family members and heirs avoid a lengthy probate process after you pass away. However, if you have children who will need guardianship, creating a will is absolutely crucial to protect them and their inheritances. Ultimately, deciding between the two is a matter of personal choice, but some experts recommend having both.
While most people should have a will that expresses their wishes after they pass away, not everyone needs a trust. If you have property to place in a trust and have children, you might want to have both a will and a trust.
Having either a trust or living will can help your family when you pass away. Not only do they both provide specific instructions for what should happen to your assets, but a will can also protect your children and pets.
A trust, a will, or both can help you ensure that your wishes are taken care of after you pass away. Making an estate plan now can help save you money and your family hardship in the future.
About the Guest Author –
Matt Casadona has a Bachelor of Science in Business Administration, with a concentration in Marketing and a minor in Psychology. He is currently a contributing editor for 365 Business Tips. Matt is passionate about marketing and business strategy and enjoys the San Diego life, traveling and music.