Trust vs. Will: What’s the Difference?
Trust vs will: what’s the difference? Both are legal arrangements that distribute property to your friends and families but operate in different ways. It’s an important thing to think about, but something that most people don’t do: over 60 percent of Americans has done no estate planning.
Keep reading to see how trusts and wills differ, and to figure out which one is the best fit for what you need.
Wills are legal documents that only take effect when you die. As a part of a will, you appoint an executor to distribute your property to your friends and relatives. Wills can only handle property that you own outright.
Wills require a Probate Lawyer and are entered into public record once they take effect. This means that the flow of property and money has to be overseen by a court, which can extend the time it takes for the estate to be distributed.
Wills also operate in areas that trust, as financial vehicles, cannot. For example, you can name guardianship of dependents in a will and can specify any final wishes that you may want, like memorials or funeral arrangements.
The largest difference between trusts and wills is that trusts can be put into effect before you die. A trust is a legal entity that manages your funds and assets on your behalf. Your money and property are no longer in your name, but in the name of your trust.
There are three main types of trusts that you can choose from. Revocable living trusts are trusts that name you as a trustee. You still have a lot of power determining where your money goes and what remains in your name.
Irrevocable living trusts turn control over to someone else that you’ve named as a trustee. You cannot remove funds from that trust yourself, nor can you reverse the decision of creating that trust and turning it over to someone else.
Testamentary trusts are trusts created as a part of someone’s will. Upon someone’s death, a trust is created by the will’s executor. This is done to hold funds for a specific period of time before they are distributed, to reduce the will’s tax burden, or for other administrative and financial reasons.
Keep in mind that since testamentary trusts fall under the will probate process, they will be overseen by a court and entered into the public record.
Trust vs Will: Each Fits Different Needs
Now that you know how to compare a trust vs will, you’re able to figure out which one is best suited for your needs. Don’t wait until the last minute to write your will or set up a trust. Having either (or both!) set up well in advance can leave you with peace of mind knowing that those you love will be taken care of once you’re gone.
Check out the Estate Planning section of our blog for more information about end-of-life planning!