If you’re considering comprehensive estate planning, you might be wondering whether to use a will or a trust. Both are vital estate planning tools that you can use together or individually to ensure that your assets are distributed according to your wishes.
But what’s the difference between a will and trust? Keep reading to discover what differentiates the two tools before deciding which is the right option for you.
What Is a Will?
A will is a legal document stipulating how you wish your assets to be distributed to your beneficiaries after your death. If you want your will to be valid, you should know how to write a will with or without a lawyer.
You should include essential information such as your estate’s executor and the names of your beneficiaries. If you have minor children, your will should state who you’re choosing as their legal guardian.
What Is a Trust?
A trust is a legal arrangement that allows a third party to hold and manage your assets. There are different types of trusts depending on your objectives. However, the most common is the living trust, which can be revocable or irrevocable.
A revocable trust allows you to act as the trustee during your lifetime. You can change the trust’s terms and move your property in and out of the trust as you wish. On the contrary, an irrevocable trust means that you relinquish the care and control of the property in your trust forever.
How Do a Will and a Trust Differ?
If you want to navigate the will vs trust dilemma, you must learn the main differences between the two. Here is a summary of the differences.
When They Take Effect
A will only goes into effect after your death. Once you die, your appointed executor will start implementing the wishes in your will, including distributing your property to your named beneficiaries.
A living trust will take effect immediately after you create and fund it. This means that the trust will protect and direct the management of your assets if you become mentally incapacitated.
Probate and Privacy
If you end up writing a will, there will be probate before the executor transfers your assets to beneficiaries. A probate court will confirm your will before allowing the executor to distribute your property.
This process will be easier if your executor or family works with an estate administration lawyer. Your probated will becomes public record, and anyone will be able to see its details. On the contrary, a trust’s terms will remain private because probate is unnecessary.
What Each Plan Covers
A will covers all the assets in your name at the time of death. It cannot cover the assets you hold in joint tenancy or those you’ve put in a trust.
A living trust covers all the property that you use to fund it. The property will include everything you put in the trust’s name, including tenancy-in-common interests.
Understand the Difference Between a Will and a Trust for Better Estate Planning
Knowing the difference between a will and a trust will help you choose the estate planning tool that suits you best. You’ll choose the option that makes you feel more confident, knowing there will be no wrongful allocation of your assets. Your loved ones will also be at peace if you plan how to pass on your assets after your death.
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