Deciding between a will and trust can be daunting, but this decision has a far-reaching impact on your life and those you love most. Understanding the nuances that differentiate them is crucial to establishing an optimal estate plan. The debate of a will vs. trust essentially boils down to a question of the process through which you transfer assets to beneficiaries. Here is everything you need to know about both:
What is a Will?
Examining wills vs. trusts and what’s right for you requires understanding what both estate planning instruments are.
Essentially, a will is a document that details the creator’s wishes about the distribution of their property. You must draft the document, sign it with witnesses, and file it with local probate courts. Learn more about the pros and cons of this estate planning instrument:
The Pros and Cons of a Will
When a Will Comes into Effect
Depending on your situation, this could be a benefit or drawback. A will goes into effect upon the creator’s death, which offers less flexibility but has an immediate impact after the creator’s passing.
Probate Court
The probate court oversees the distribution of assets in a will to ensure they adhere to the will creator’s wishes. Because of this, the distribution process can take significantly longer, between 12 – 16 months, which results in sizable court fees.
Protections for Minors
Still, one significant advantage a will has is the protections they offer minors. Wills enable you to designate guardians for minor children in the event of the creator passing before they have reached adulthood, which trusts cannot do.
Public Record
Depending on how sensitive your situation is, privacy may be a priority. Because they pass through probate court, will proceedings are public record, which means anyone can access and dispute them.
What is a Trust?
When considering the difference between wills vs. trusts, a key differentiator is a trust is more of an arrangement that enables a third party to hold and control a trust creator’s assets in a designated fund.
Trusts offer total flexibility and control over when and how you distribute your assets. Here is an overview of the pros and cons:
The Pros and Cons of a Trust
When a Trust Comes into Effect
Unlike a will, a trust goes into effect immediately after they create a trust. If the creator is incapacitated and can no longer control their trust, they nominate a third party to handle the affairs. Expect a trust to have an impact while you’re still alive.
No Probate Court
One benefit of using a trust is they are often faster because you don’t have to subject them to probate court. Probate court is expensive and lengthy, and trusts help avoid it.
Complexity
One drawback of using a trust is trusts are often more complicated to set up. After creating a trust, you must fund it by transferring assets into it, transferring titles, and making the trust the owner, which makes setting them up more arduous.
Privacy
If discretion and privacy are important, a trust may be right for you. Trusts are private record, which can protect your heirs’ privacy. Moreover, this has an added benefit. Keeping details private minimizes the chances of someone challenging a trust.
Maintenance
Still, trusts require more maintenance. You must keep them up-to-date with all your property, which means any time you obtain a new asset, like a home, car, or bank account, you should transfer it to your trust as soon as possible.
Because you will accrue new property throughout your life, trusts require continuous maintenance, and you must make these adjustments manually.
Contact Gokal Law Group for Premier Counsel on What Estate Planning Instrument is Right for You
Depending on your situation, using both in conjunction may be ideal. Generally, wills are cheaper to create and implement, but people can contest them in probate court far easier. Alternatively, wealthy people and business owners may be better off avoiding probate to minimize tax exposure through a trust. Ultimately, everyone needs a will, but not everyone needs a trust, which is critical to understand when choosing between a will vs. a trust.
At Gokal Law Group, we boast unequaled expertise and a dedication to fortifying and preserving client estates. Contact us to schedule a consultation. We will ensure those you love most are taken care of, even when you’re not here to take care of them.