Wills and trusts are two important tools that allow you to protect your assets and ensure your wishes are carried out after you’re gone. However, understanding the differences between wills and trusts can be overwhelming. To help you make an informed decision, let’s look at the basic aspects of wills and trusts.
What is the Difference Between Wills and Trusts?
A will is a legal document that details how your assets should be distributed upon your death. It allows you to name who you want your assets to be distributed to (i.e, who are your beneficiaries), designate guardians for minor children, and even specify funeral arrangements (i.e, do you want to be buried or cremated?). Wills are relatively straightforward and cost-effective in the short-term. However, when our clients are trying to decide between wills and trusts, we explain a will as instructions to a probate court. Wills must go through probate, a court-supervised process that can be time-consuming and costly since it will likely require your beneficiaries to hire an attorney and it opens up your estate to the possibility of disputes.
On the other hand, when comparing wills and trusts, it is important to know that the main difference between the two is that a trust is a private contact between you and your trustee. Your trustee plays the same role as your executor under a will. The trustee ensures that your assets go to whomever you have specified. The trust itself holds and manages your assets during your lifetime and after you pass away. By creating a trust, you can transfer ownership of your assets to the trust and appoint a trustee to manage them according to your instructions. If the trust is set up properly, it can help you avoid probate, maintain privacy, and provide additional benefits like minimizing estate taxes or protecting assets from your beneficiaries’ creditors. Trusts must be set up correctly in order to realize these benefits. Forms you find online are insufficient to provide these protections on their own. Trusts are more expensive to set up initially, but once in place over the long term a trust is substantially less expensive than a contested probate process.
Making the Decision Between Wills and Trusts
So, now that you know the difference between wills and trusts, which one is right for you? The answer depends on your unique circumstances and goals. If simplicity and cost-effectiveness in the short-term (during your lifetime) are paramount, a will may suffice. It is certainly better than nothing. However, if you want to make it easier on your family in the future, minimize probate court involvement, protect your privacy, or plan for incapacity, a trust is likely the better option. It’s important to consult with an experienced estate planning attorney who can assess your situation and guide you towards the most suitable solution.
Wills and trusts serve different purposes in estate planning. While wills are simple and straightforward, trusts offer added flexibility and protection. Understanding the basics of each instrument is crucial to making an informed decision. Remember, consulting with a qualified attorney is key to creating a comprehensive estate plan that meets your specific needs and goals. Windrose Law Center attorneys help you ensure your plan aligns with your wishes, provides for your loved ones, and minimizes potential legal challenges.