Estate Planning Basics: What is the difference between a Will and a Trust?
Many people, when they hear about preparing Wills and Trusts for estate planning purposes, assume that they are the same thing, or at least very closely related. While both, when done right, aim to achieve a basic common goal of directing to whom and how your assets will go, they operate in different ways. Depending on your specific situation, one might be far more appropriate than the other as your primary estate-planning tool. Let’s take a look at what a Will does versus how a Trust operates.
Where There’s a Will, There’s a Way
Every estate plan, whether for Bill Gates or the local grocer, should begin with a Will. It answers the basic question of most estate plans – where will my property go when I die? A Will determines who receives your assets passing through your estate when you pass on, and who will oversee that distribution. You can direct how specific property is distributed, such as a cherished family heirloom, or direct property in ways that the law would not grant by default, such as to a friend or companion. You can also assure a planned future for your children by nominating who will take care of them if they are still minors when you pass on.
How Is a Trust Different?
Trusts, also referred to as living trusts, are much more complex documents. While they can determine who receives your assets when you pass on, they can shield and protect your assets in ways a Will simply cannot, and streamline the management of your assets while you are still alive. For starters, a Trust holding your assets during your lifetime can protect them from creditors or claimants, and when you are gone can minimize or eliminate the taxation of your estate. A Trust can also make it extremely easy for you to direct your assets to where you want and to later change your mind without the formalities that a Will requires. These objectives cannot be achieved with an ordinary will.
Unlike a Will, a Trust does not need to be allowed in Court after you die, and so family disputes following death can often be minimized, including characterizations of your mental competence that can become an issue in a Will contest. Avoiding these ugly scenes is easier with a Trust, which remains a private document and will not be made a public record after you die.
Choosing One Over the Other
Given that having a Will should be a default, the question really becomes whether you should supplement that document with a Trust. This decision will be driven by your individual needs and desires, not just on death, but during your lifetime. It is a decision that should be made in consultation with a qualified estate planning attorney who can guide you through the process. Contact Winstead Law today to discover whether a Will or Trust is the best option for you.