A Will and a Trust are both ways for you to say who will receive your assets. They do it in different ways and each has advantages and disadvantages. One of the differences is how and when they take effect. A will does not take effect until you pass away. A trust takes effect upon signing the legal document.
A will is a set of instructions that directs those assets you own individually, with no designated beneficiary, and appoints a personal representative to administer your estate after you pass. Generally, a will must go through probate where it is examined by an authorized court administrator which can be a lengthy and cumbersome process. In most cases a will becomes public upon your death.
Your will does not cover some types of assets. Any accounts that you own jointly with another individual will automatically pass to the survivor without going through the probate process. Retirement accounts and life insurance policies will have beneficiaries named in the original documents.
A trust, like a will, directs how your assets will pass to your beneficiaries, but it may be funded during your lifetime and can provide for incapacity planning as well. Your trust can outline a plan for what actions to take if you are unable to make your own decisions and need help from your family members.
A trust can provide some benefits that you wouldn’t typically get with a will, with more privacy and without the costs and hassle of probate court and is less likely to be successfully challenged. A trust can hold assets for your own benefit and for a third party’s benefit and can outline specific rules for how assets will be distributed both during your lifetime and after your death.
If you create a trust, you will need to fund that trust. Any assets that you want your trust to control will need to be titled in the name of your trust.
A trust allows you to appoint a trustee to manage your trust. You can serve as trustee of your trust and name a successor trustee for a time when you are no longer able or no longer want to act as trustee. A trustee will have the authority to address problems and handle complicated issues on your behalf.
Keep in mind retirement accounts and life insurance policies will have beneficiaries named in the
original documents. It’s a good idea to periodically confirm that the beneficiary listed is still living and your intended recipient.
Having a plan in place while you are still in good health will help ensure that your estate is handled the way you intend. It can also be one of your greatest gifts to your loved ones who will be guided by your instructions. The choice of a will or a trust is yours and can depend on your specific
financial and personal circumstances. There are many situations in which you will want both vehicles.
Your legal advisor can guide you through the options and help you decide what’s best for you and your family. If you’ve already made the choice, be sure to review the documents periodically to make sure they still reflect your wishes.
This information is intended for educational purposes only and should not be taken as legal advice. Always consult an attorney before making decisions about your estate plan.