Both wills and trusts are legal documents that help distribute your assets after your death. However, there are a number of differences between wills and trusts. We’ll review the pros and cons of each, to help you create an estate plan that’s aligned with your goals.
Benefits and Challenges of Wills
Wills are the most common form of estate planning. A will can help you establish beneficiaries, guardians for minor children, caretakers for your pets, and legacy giving.
However, wills may not offer as many legal protections as trusts. They’re also subject to probate – which means they’re public record . Still, if you have a streamlined estate, you need to urgently create an estate plan, or you’re working on a budget for estate planning, a will may be a solid choice.
If you pass away without a will, it will be up to state law to determine how your estate is allocated. These laws are known as intestate succession laws. Without clear guidance in a will or trust, your loved ones may not receive the financial inheritance or personal mementos you may have wished for them – but even a simple, properly executed will can help alleviate these issues.
Benefits and Challenges of Trusts
A trust may be more complex and expensive to create, but it can provide more specific instructions over the management of your estate, both during your life and after your death. This can be very helpful if your estate is extensive and complex. Trusts also offer some key benefits. For example, trusts do not require probate, which also means a trust will not become public record automatically. (They may become public record should a lawsuit arise, but this is rare).
There are two main types of trusts: revocable trusts (also known as living trusts) and irrevocable trusts. Revocable trusts can be updated, changed, or dissolved throughout your lifetime, as long as you are of sound mind to do so. You (the grantor) appoint a trustee – which can be an individual, bank, or trust company – to manage your trust assets during your life and after your death. You can also be the trustee, and appoint a successor to manage your assets after you pass away.
The terms of irrevocable trusts are set upon signing and cannot easily be changed. While irrevocable trusts are not commonly used, they appeal to some grantors because of the possible tax breaks and protection from creditors they offer. Additionally, the legal securities of an irrevocable trust may be the preferred choice if the grantor is concerned about exploitation due to age or health-related challenges.
And as we mentioned in our recent pet trust blog, pet trusts can also offer more protections for your animals than a will. That’s because pet trusts legally require the assigned caretaker to solely use the trust funds for the care of your pets after your death. Pet trusts also provide immediate support for your pets if you pass away or become incapacitated, without the risk of delays due to probate.
Creating Your Estate Plan
It’s never too early to create a will or trust. And while the thought of end-of-life planning brings unease to many, it can provide enormous support and peace of mind to your loved ones after you pass away. Whether you’re creating a will or trust for the first time or reviewing and updating your plan, we’re here to provide guidance and support throughout the process.