Wills and Trusts are both great legal instruments that help you create an estate plan, they serve different purposes. While a Trust and Will have quite a few overlaps when it comes to their usage, there are some crucial differences that you should consider when deciding which one is right for you.
Let’s first understand what a Will or Trust does for you.
What is a Will?
A Will, also known as a Last Will & Testament, is a legal document that allows you to outline how you would want your assets to be distributed. This could include your property, bank accounts, cars, etc. You can also assign legal guardians to your minor children who would take the responsibility of raising them in a situation where you pass away.
What is a Trust?
A Trust is a legal instrument that lets you create an arrangement in which you can transfer your assets into a trust and assign a trustee to manage them. You could name yourself as the trustee too, just make sure you’ve also nominated someone as the successor trustee who would take your place after you die. In other words, you would transfer the ownership of the assets to the trust wherein the trust would own those assets and the trustee would oversee it according to the instructions that you’ve mentioned while setting this up.
What's the difference between trust and will?
Now that we understand what each a trust or will can do for us – let’s look at how they differ from each other. At the end of this article, you would have enough information to know for sure which one is right for you.
Trust is effective even while you’re living
A Will is effective only after you pass away whereas a Trust is active the moment you sign it. This means that a Will by itself cannot protect you in medical emergencies where critical decisions are to be made about procedures & finances if you become incapacitated while a Trust can.
On the other hand, a Will lets you assign legal guardians for your kids, something that a Trust is unable to do.
1. Trust doesn’t necessarily require probate, a Will does
Probate is the process that the state court follows to distribute your assets when you pass away. The assets you own must go through probate with or without a Will. In most cases, this process is time-consuming and expensive especially when you do not have a Will.
Creating a Trust lets you transfer ownership of the assets to that Trust. This allows you to skip the probate process entirely and keep your loved ones off that legal rollercoaster ride.
2. Creating a Trust lets you keep things private
The probate process we discussed above is public proceedings. This means that anybody can approach the court and access the details of your estate upon request. A Trust prevents this by keeping matters private and out of the public eye.
3. Making a Will is less expensive
Typically, a Will is comparatively less expensive than a Trust. With a lawyer, a Will could cost you anywhere from $500 to $1000 or beyond whereas the average cost of a Trust would be about $3000. Also, a Trust needs funding – which means that the assets you have transferred to the Trust must be properly titled.
Don’t let these numbers scare you though! With TrulyWill you can create both for a fraction of that cost
4. A Trust is less likely to be contested
Due to the ongoing nature of a Trust, it is less likely to be contested in the court by saying that you were not in the right state of mind or did this under someone else’s influence. The same cannot be said for a Will.
We already spoke about how a Will requires to go through the court to gain credibility. If you think that there is a possibility of a family feud leading up to legal battles during the probate process – creating a Trust along with a Will might be a more secure option to prevent future horror stories.
SO WHAT IS RIGHT FOR YOU? Will or Trust
For most people with regular families and modest assets, a Will should be good enough for an estate plan. However, creating a Trust might be a good idea if you think that,
- You have a large or complex estate (>$5 million)
- You own multiple businesses
- Keeping things private is in your best interest
- Avoiding probate is a good idea
- There will surely be legal disputes between family members and you want to avoid that
- Having a guardian to manage your your kids incase they are minor
The most comprehensive way to create a secure estate plan to protect your loved ones would be to create both a Will and a Trust. Also, if estate planning seems like an overwhelming topic at this point for you – starting off with a simple Will and later expanding on it by exploring a Trust is a good way to go about it. With TrulyWill you can create a Will from the comfort of your home at just $79.
