When planning your estate, understanding the differences between trusts and wills is essential. Both tools serve to distribute your assets after your death, but they operate differently and offer unique benefits. This article will help you determine which option, or combination of both, is best suited for your needs.
Trust vs Wills: The Difference in Estate Planning
What is Wills?
A legal document that specifies how your assets and properties will be distributed after your death. It can also designate guardians for minor children.
Key Features:
- Simplicity: Easier and less expensive to create.
- Probate: Must go through the legal process of probate.
- Public Record: Becomes part of the public record during probate.
- Flexibility: Can be easily updated with codicils.
- Distribution of Assets: Specifies how your assets will be distributed and who will manage your estate.
What is Trusts?
A legal entity used to protect and manage your assets and properties.
Key Features:
- Avoids Probate: Bypasses probate for quicker asset distribution.
- Privacy: Keep your financial details confidential.
- Control: Offers detailed control over how and when assets are distributed.
- Irrevocable Trusts: Once created, they cannot be altered or revoked, protecting assets from creditors and litigation.
- Ownership: Assets placed in a trust are owned by the trust, not the individual.
Comparing Trusts and Wills: Which One is Better for My Estate?
Now that we have established the basic understanding of both trusts and wills, your next question will be which one will suit you better.
Choose a trust if you have significant assets in your estate to distribute. While a disgruntled heir may challenge the trust if they are unhappy with the outcome, trusts are generally good for managing substantial estates. Trusts offer privacy and detailed control over the distribution of your assets, which can be beneficial for complex estates with noteworthy assets.
Choose a will if managing costs is a concern. Wills are typically more affordable to create and update than trusts. They are specific about what assets to distribute and to whom. If you have assets not named in your trusts, you can list them in your will, ensuring none of your properties go unaccounted for. Like trusts, wills can also be contested by heirs who are dissatisfied with the distribution.
Conclusion
Choosing between a trust and a will depends on your specific needs and estate complexity. Wills are simple and essential for guardianship and specific instructions, while trusts offer greater control, privacy, and probate avoidance. Often, a combination of both provides the most comprehensive estate planning solution. Consult an estate planning professional to determine the best approach for your situation.