Everyone has heard of wills and trusts, but most are “fuzzy” about the difference between them as they are rooted in complicated, centuries-old law. Let’s look at a basic comparison.
Will. A will only goes into effect when you die. It:
- provides for the division of your accounts and property at death, but not accounts and property directed to others through beneficiary designations.
- sends accounts and property that do not have designations and that are owned solely by you, in your individual name, through the probate (court) process.
- allows you to appoint permanent guardians for your minor child.
- names the person you wish to wind up your affairs (personal representative).
- does not always include protective trusts for your beneficiaries and tax planning because most wills are simple documents.
- tends to cost less than a trust on the outset but may cost more to settle during probate court proceedings after death.
Trust. A trust is a formal document where you name someone to manage your accounts and property for your benefit and the benefit of others. A trust is effective during your lifetime, during any period of incapacity, and after death. It:
- provides for the division and gifting of your accounts and property.
- avoids the involvement of the probate court if the trust is fully funded.
- allows for the continuous management of your accounts and property – even if you are still alive but unable to do so yourself.
- often includes protective trusts for your beneficiaries and tax planning.
- costs more than a simple will at the outset but may cost much less upon administration, while typically providing significantly more value.
The Probate Process: A Key Element in Deciding Between a Will and Trust. One key element in deciding between a will and a trust is understanding the probate process. The term “probate” refers to the process wherein a deceased person’s will must be determined to be valid, outstanding legitimate debts paid, and the accounts and property transferred to the beneficiaries. The downside is that probate can take a long time, it is expensive and time-consuming, and the process is public.
HOW TO DECIDE: As everyone’s situation is different, it is important to analyze every aspect of your situation – and what the future may hold – so that you can determine what is right for you and your loved ones and whether probate avoidance, incapacity planning, and trust protections have value to you and those you love.
ACT NOW: Without an estate plan in place, you and your family are left completely unprotected. Call our office now to schedule your in-person or virtual meeting. We will help you determine whether a will or a trust makes sense for your situation. You do not have to make these decisions alone.