There are a few key documents when it comes to estate planning. The most well-known estate planning document is a will, followed by a trust.
But what is the difference between a will and a trust? And which one should you choose for your estate plan?
Our blog post will discuss the differences between wills and trusts and help you decide which is right.
Table of Contents
What is a Will?
A will is an official document that outlines your wishes for how your property and assets are distributed after you die. It also names an executor, who will carry out the instructions in the will.
The will lawyers in Adelaide say you need to have witnesses sign the will when you create it that are legal adults and of sound mind. Then, it should be updated as needed. For example, any major changes occur in your life, such as marriage, remarriage, having children, or acquiring significant new assets or debts.
What is Trust?
A trust is a legal agreement between the grantor (the person creating the trust) and the trustee (the person appointed to manage the trust). The grantor puts certain assets into the trust and has the trustee manage those assets on behalf of one or more beneficiaries.
The trustees are responsible for using the assets in the trust to pay any debts associated with the grantor. In addition, a trustee must provide for its beneficiaries according to the instructions laid out in the trust document.
What Are The Differences Between a Will and a Trust?
The main difference between a will and a trust is that when someone dies, their will goes through probate court before it can be executed.
Probate is a lengthy process that can take months or even years. In addition, it requires court fees and other costs depending on your state’s laws. On the other hand, a trust does not need to go through probate because it is already set up and in effect.
After Death Privacy
Another difference is a will only take effect after you die, while a trust can take effect before or after your death. As a result, setting up a living trust while you’re still alive can avoid probate altogether. It’s because the trustee is already managing the assets in the trust according to your instructions.
Trusts also offer more privacy than wills because they don’t have to be made a public record like wills do during probate.
Jointly Owned Assets
A will only covers assets you own outright. So if you have joint ownership of an asset with someone else, it won’t be included in the will. However, a trust can cover joint and individually owned assets.
As a result, all your wishes on how assets are handled can be detailed in the trust document. For instance, if you are married and have jointly owned assets, a trust can provide instructions on how those assets should be distributed to your beneficiaries after both of your deaths.
Should You Make a Will or Trust?
Choosing between a trust and a will depends on several factors, such as your goals for estate planning and how much time you want to spend. Setting up a trust is likely your best choice if you have a complicated estate or multiple assets that need to be distributed. Trusts can also help you avoid probate and protect your privacy.
Wills are simpler documents and are usually cheaper than trusts to create. However, they don’t offer the same protection or flexibility level as a trust.
Ultimately, it’s essential to speak with an experienced will and estate lawyer to understand which type of estate planning document is best for your situation.
What Are The Benefits of Having a Will?
A will offers many benefits, including:
- Naming an executor who will carry out your wishes after your death
- Clarifying how you want your assets to be distributed
- Ensuring that any debts or taxes are paid after your death
- Providing for minor children and guardianship, if necessary
- Protecting the privacy of your estate by avoiding probate court
What Are The Benefits of Having a Trust?
The main benefit of a trust is that it can provide more protection than a will.
Here are some benefits of having a will:
- Allows you to manage and control how assets are handled before and after death
- Protect assets from creditors or potential lawsuits
- Tax advantages
- Specify how the trust assets should be distributed after your death.
Overall, both a will and trust offer important protections and can be used together as part of an estate plan. It is essential to consider all the details of your unique situation when deciding which document is best for you.
Consulting with an experienced will and estate lawyer can help you determine the best estate planning documents.
What Happens if You Don’t Have a Trust or Will?
If someone dies without a valid will or trust, it’s known as dying intestate, and their estate will be subject to state laws on intestacy. It means the state will determine the distribution of assets and may not accurately reflect the person’s wishes.
Additionally, intestate estates are subject to probate, which can add time and more costs. Therefore, it’s crucial to have either a will or a trust in place so that your wishes are properly carried out after you pass away.
How Should I Choose an Executor for my Will?
Choosing the right executor for your will is an important decision that requires careful thought and consideration. An executor is responsible for handling the legal aspects of settling your estate, including collecting assets, paying debts and taxes, distributing property, filing tax returns, and much more.
When choosing someone to serve as your executor, you should look for someone trustworthy, organized, and willing to take on the responsibility. Being a trustee is a lot of work!
Difference Between a Will and a Trust Summary
The difference between a will and a trust is a vital decision that should not be taken lightly. Both documents have their own unique benefits that can be advantageous for different people.
It’s important to speak with an experienced will & estate planner to understand the best option for your individual situation.