TRUST VS WILL: WHAT IS THE DIFFERENCE?
According to a survey from Caring.com, a senior living referral service, approximately two-thirds of Americans do not have a will, trust, or similar end-of-life planning document.
What happens to you and your assets in case of disability or death when you don’t have a plan in place? It’s left up to others, including the state.
Should you have a will? Should you put your assets in a trust? What is the difference?
When looking at trust vs. will, it’s important to learn the differences. Keep reading as we define the two and share information on the key differences. You’ll be able to make a more informed decision after gaining this important insight.
Definition and Purpose
You’ve probably heard the two terms “trust” and “will” as they relate to estate and inheritance planning. Before you decide between the two, you should learn what each one is and how it relates to your life and situation.
What Is a Will?
A will is a legal document that specifies how your assets will be distributed after your death. This essential document allows you to:
- Name an executor of the will
- Name guardians for kids and pets
- Designate where your assets go
- Specify final arrangements
A will takes effect upon your passing and is generally subject to probate. Probate is a court-supervised process that helps ensure your estate is handled according to your wishes, especially if additional estate planning hasn’t been done.
What Is a Trust?
A trust is a little more complicated. After seeking legal advice, you set it up and fund it by retitling your assets in the name of the trust. Trust benefits are as follows:
- Greater control over when and how your assets are distributed
- Any of your assets can be held inside the trust
- They come in many different forms and types
The trust goes into effect immediately upon creation and funding, not after you pass. Trusts can minimize or help you avoid probate entirely.
Key Differences Between Wills and Trusts
While characteristics of wills and trusts may overlap, there are several differences between the two.
A will becomes effective after you pass, and a trust becomes effective immediately after setting it up.
Trusts are designed to help avoid probate, offering a smoother transfer of assets compared to wills, which typically go through the probate process. While setting up a trust may involve more paperwork, it offers significant advantages, such as potential tax benefits. Additionally, a trust can include a pour-over will, where you can specify guardianship for your children or dependents, combining the benefits of both estate planning tools.
When to Use a Will vs. a Trust
As you ponder trust vs. will, it’s important to know that a will is more appropriate if you have young children and need to name guardians for them. If you prefer simplicity, a will gives you that advantage.
A trust is especially valuable if you have a larger estate or if you prioritize privacy in managing your assets. It also allows for greater control over how and when your assets are distributed, providing flexibility to meet your specific needs.
Trust vs. Will: Which One Is Best for You?
When thinking about trust vs. will, remember the differences outlined above and consider your estate planning needs.
Let Mason Law and Planning in Colorado Springs help you accomplish the task of securing your legacy. Our highly skilled legal team is on a mission to assist you in protecting your assets and carrying out your wishes through estate planning. You can reach us through our website or by calling (719) 428-4495.