When it comes to managing your assets and ensuring they’re distributed according to your wishes after your passing, estate planning is crucial. Two common tools used in estate planning are wills and trusts. While both serve similar purposes, they have distinct differences that can impact how your estate is handled. Understanding the difference between wills and trusts can help you make an informed decision about which tool best suits your needs.

What is a Will?

A will is a legal document that specifies how your assets should be distributed after you pass away. It can also be used to name guardians for minor children, appoint an executor to manage your estate, and communicate your final wishes.

Key features of a will include:

• Takes Effect After Death: A will only becomes active after your death, outlining the distribution of your estate.
• Goes Through Probate: After your passing, your will must go through probate, a court process that oversees the distribution of assets to ensure that everything is handled according to your wishes.
• Covers Property in Your Name: A will applies to assets that are solely owned by you at the time of your death.
• Can Be Updated: A will is flexible and can be revised or updated at any time before your death to reflect changes in your circumstances.

What is a Trust?

A trust is a legal arrangement in which a trustee (an individual or institution) holds and manages assets on behalf of beneficiaries. Unlike a will, a trust can be established during your lifetime and helps manage your assets both before and after your death.

Key features of a trust include:

• Can Take Effect Immediately: A trust can be set up while you’re still alive, allowing for the immediate management of your assets.
• Avoids Probate: Since a trust bypasses the court system, assets are typically distributed faster and without the need for probate.
• Provides Ongoing Management: If your beneficiaries are minors or need financial supervision, a trust ensures assets are managed according to your wishes.
• Covers Only Trust-Owned Assets: For a trust to be effective, assets must be transferred into the trust before they can be managed according to its terms.

Key Differences Between Wills and Trusts

The difference between wills and trusts is important to consider when planning your estate.

A will takes effect only after your death and must go through probate, a court process that can cause delays. It also becomes a public record, meaning the details of your estate and its distribution are accessible to anyone. Wills provide less ongoing control over your assets and don’t protect against incapacity, as they only take effect after you’ve passed away.

On the other hand, a trust can be established while you're still alive, offering the opportunity for immediate asset management. Since a trust avoids probate, it enables a faster distribution of assets. It also remains private, ensuring that the details of your estate are not accessible to the public. Additionally, a trust provides more control over how assets are distributed, and it can also be used to manage assets in case of incapacity.

Benefits of a Will

1. Simplicity: Wills are generally easier and less expensive to create than trusts. They provide clear instructions for distributing your estate without the need for complex legal arrangements.

2. Ability to Name Guardians: A significant advantage of a will is that it allows you to name guardians for minor children, ensuring their care after your death.

3. Flexibility: A will can be easily updated to reflect changes in your life, such as marriage, divorce, or the birth of children.

Benefits of a Trust

1. Avoids Probate: One of the main advantages of a trust is that it bypasses the probate process, enabling assets to be distributed faster without the delays of court involvement.

2. Maintains Privacy: Unlike a will, which becomes a public record, a trust remains private. This helps protect the confidentiality of your financial affairs.

3. Provides Control Over Asset Distribution: A trust allows you to dictate when and how assets are distributed. For example, you can specify that beneficiaries only receive their inheritance at a certain age or after achieving specific milestones.

4. Protects Against Incapacity: A trust ensures that if you become incapacitated, your assets will be managed by a trustee according to your wishes, helping avoid the need for a court-appointed guardian or conservator.

When Should You Choose a Will?

A will is a great choice if:

• You have a straightforward estate with minimal assets.
• You want to name guardians for your minor children.
• You don’t mind your estate going through probate.
• You don’t require ongoing management of assets after your passing.

When Should You Choose a Trust?

A trust is beneficial if:

• You want to avoid probate and speed up asset distribution.
• You have significant assets or property in multiple states.
• You want to have control over how and when assets are distributed to your beneficiaries.
• You need to provide financial management for minors or individuals with special needs.
• You want to plan for potential incapacity and ensure your affairs are managed according to your wishes.

Can You Have Both a Will and a Trust?

Yes! Many people opt for both a will and a trust in their estate planning. A pour-over will is often created alongside a trust to ensure that any assets not placed in the trust during your lifetime are automatically transferred to it upon your death. This combination offers the comprehensive benefits of both tools.

Conclusion

Choosing between a will and a trust depends on your personal estate planning goals. A will is a simple and effective tool for distributing assets and naming guardians for your children, whereas a trust offers more control, privacy, and probate avoidance. If you’re unsure which option is best for your situation, Jostock & Jostock, P.A. can help guide you through the decision-making process and provide expert estate planning advice.