You might be wondering what’s the difference between a will and a trust. While they are similar in many ways, there are also important differences. Trusts can provide some benefits that wills don’t offer, and vice versa. In this blog post I’ll explain how both types of estate planning documents work and which one you should use. So let’s have a look at will vs. trust: What’s the difference and how to choose!
What is a will?
A will is a legal document that describes how you want your assets distributed after you die. Specifically, it’s about who you want to inherit your assets and/or care for your children.
The advantages of creating a will are:
It lets you control what happens to your money, possessions and other property after death.
A will makes things easier for everyone involved when someone dies. After all, there won’t be any questions about what should happen with the deceased’s assets.
If you properly write and sign your will, you can avoid disputes among heirs. Such disputes usually go over how much each person should receive from an estate.
What is a trust?
A trust is a legal agreement that allows you to manage assets for someone else. That would often be your spouse or child. You can also use a trust to avoid probate and settle property disputes.
The beneficiary is typically the person who will benefit from the assets in a trust. That could also be an organization, like a charity or nonprofit. The trustee is accountable for managing the money according to the terms of your trust.
You can see that a will and a trust are quite similar. But in which ways are they different?
A Will is often easier to craft
A will is often easier to craft. Anyone over the age of 18 can prepare it, regardless of their estate’s size or complexity level. It’s a relatively easy task to complete if your estate is simple. A will in its most basic form doesn’t involve any minor children, disabled beneficiaries, or any other special issues.
Will vs. Trust: Effective Date
You can also choose to set up a trust to take effect at a future date. This may be useful if you want to leave property to someone who doesn’t have immediate access to it. For example, if they’re still in school or living abroad.
If you use a will, things are different. First of all, a will becomes effective upon your death. Then your assets will go through probate before they can be distributed. Probate processes vary from state to state but usually take anywhere from six months to two years. This depends on how complicated things get (and sometimes even longer). After this process is complete, beneficiaries receive their shares of the estate according to what’s stated in your will.
This gives us a good idea of how different the timeline of execution of these document can be.
Trusts can often avoid probate
As we mentioned above one of the key benefits to a trust is that it avoids probate. Probate is the process in which a court oversees the distribution of property after someone dies. It can be very expensive and time-consuming. In fact, estate administration costs are typically 2-3% of the value of an estate.
If you choose to set up a trust instead, your heirs won’t have to go through this ordeal. Keep in mind that this is on top of dealing with their grief at losing you. And it will also save them from paying taxes on any assets left behind by your estate.
Trusts may also provide more protection from creditors and lawsuits
If you’re worried about creditors or lawsuits, trusts may be a good option for you. A trust can protect assets from creditors and lawsuits in several ways:
Trusts are often not easily accessible by creditors. A creditor can only reach what’s known in legal terms as “the trustee’s corpus,”. This is the actual asset that it holds on behalf of the beneficiary. They generally cannot access other assets that belong to the trustee. For example, let’s say you have a house in your name but you put it into trust so that your child will inherit it someday. In most cases, a creditor would only be able to take possession of this house. This protection extends even further if you’ve named multiple trustees. In this case they will each receive separate portions of the estate upon death.
Creditors in these case may have difficulty interfering with property. Of course eventually someone will have to pay for any debts you left behind.
Wills are public, trusts are private
Will are almost always public record, so anyone can find their content. Trusts often provide greater privacy than wills do when distributing assets after death. This is because there is no public record of who receives what property and/or funds under most circumstances. However, some states may require disclosure upon request. Additionally, under wills heirs may have specific rights to certain properties (such as real estate). Under trusts beneficiaries typically have no such rights: they’ll receive whatever money or property you chose once they reach adulthood. And that’s regardless whether or not they asked for it during your lifetimes!
So which one is better?
Choosing whether or not to create a will and/or trust is a matter of personal preference. Some people may be more comfortable with creating a trust. Others feel more at ease with having both documents on hand.
It’s worth noting that creating either one can often be expensive. Therefore, you need to consider your options carefully if you don’t t have much money to spend.
Maybe you’re hoping that your estate will be sizable enough within the next few years? Then having both is probably best. But keep in mind that this could also lead your beneficiaries into some unexpected tax problems down the line.
The bottom line is that there’s not one exclusive best choice.
There are advantages to creating both a will and a trust
Although creating both a will and a trust can seem like a lot of work, there are advantages to doing so. Combining these documents offers more coverage than just one or the other.
In addition, having two documents that don’t contradict each other is crucial. Many people choose to combine their wills and trusts because they worry about this possibility; In fact, this is called a testamentary trust.
Myend - Comprehensive Estate Planning
One of the conclusions for everything you just read is the following: a good estate plan includes both a will and a trust! Especially if you have children and you want to offer them the best even after your passing. We here at Myend understand and respect that. This is why we built our Last Will Plan to around this exact feeling of caring for your family. Moreover, choosing a testamentary trust (a trust within a will) comes with no extra fees. This way you can choose the best for your family and loved ones.
We hope that this article has helped you understand the difference between a will and trust. If you still have questions, don’t hesitate to consult with an attorney or reach out to us. We’ll do our best to help you make the right decision for your estate planning needs!
Myend offers the perfect estate and end-of-life planning for all! Regardless of whether you need a will or a trust for your children, we have just the document for you. Have a look here to learn more. And if you’re ready for action, sign up today for your free account! The estate planning of the future is here today.