Estate planning can involve many decisions, but two of the most common tools people use are wills and trusts. While both help manage the distribution of assets after death, they have distinct differences that can affect how one’s estate is handled.
A will: The basic function and benefits
A will is a legal document that specifies how a person’s assets should be distributed upon their death. It allows individuals to name guardians for minor children, appoint an executor to manage their estate, and decide who will receive specific assets. However, a will only takes effect after death, and the probate process must be followed to validate it in court. Probate can take time and may involve legal fees.
A trust: The basic function and benefits
A trust, on the other hand, is a legal arrangement where a trustee holds and manages assets on behalf of beneficiaries. One significant advantage of a trust is that it can take effect during the person’s lifetime, allowing for the management of assets if they become incapacitated. Trusts can avoid probate, saving time and money for the beneficiaries. Unlike a will, a trust can include more complex instructions, such as distributing assets at certain ages or milestones.
Key differences between a will and a trust
The main differences between a will and a trust lie in their functionality and the timing of their effects. A will only takes effect after death and must go through probate. It is typically simpler and less expensive to create. A trust, however, is more flexible, can avoid probate, and can take effect during the person’s lifetime. Trusts also offer more privacy, as they do not go through the public probate process.
Choosing between a will and a trust depends on personal goals and the complexity of one’s estate plan. Both tools offer essential benefits and can be tailored to fit specific needs.