Will vs. Trust: Knowing the Difference
Updated: May 31
You probably think wills and trusts are only for the rich or retired. We’re here to tell you that not only can anyone have a will and trust, but everyone should. But which document is best for you? Read below to find out!
While a will and a trust are two separate documents with many differences depending on your circumstance, they are two of the defining pillars of estate planning. Both are used as instruments to ensure your assets are administered the way you want them, avoiding the dreaded probate court. You may benefit from one more than the other, but when used together you are better prepared to reach your specific estate planning goals. It is paramount to plan and prepare for your future, and making these tough decisions now with a trusted attorney can make things easier for your loved ones when the time comes.
What is a Will?
A will is a legal document created with your attorney that outlines how your estate and assets will be distributed after your death or in the event you become mentally incapacitated. A will can:
Nominate guardians for minors and pets
Designate where property and assets go
Specify funeral arrangements
Having a will on its own is a great first step in the estate planning process, but there are some drawbacks to having a will stand on its own. It does not provide protection during incapacity, is only effective after death, is still prone to be submitted and contested in probate court, and is available to the public, unlike a trust. A trust will also take precedence over a will at the time of asset distribution.
What is a Trust?
Trust is both a separate legal entity and a fiduciary relationship. The creator of a trust—the grantor—can give control of assets to a third party, the beneficiary. With trusts, the grantor holds all control and grants access to certain assets with specific rules and conditions. The grantor creates contingencies that determine when a beneficiary can receive the assets, such as reaching a certain age or designating help to look over children with special needs.
A trust can:
Grant significant control over when and how assets are distributed
Apply to all assets funding the trust
Allow for several tax exemptions
Trusts are more complex than wills but guarantee the exemption of probate.
The Main Difference Between Wills & Trusts
The primary difference between wills and trusts is when each goes into effect. A Will don't go into effect until you pass away, while trusts are effective immediately upon funding.
Can You Have Both a Will and a Living Trust?
Depending on your situation, you may have one or the other. Each document provides a different solution and strengthens an estate plan when used together. Sit down with a trusted and knowledgeable attorney to determine what would be the best solution for your situation.