When you sit down to create your estate plan, there are likely dozens of questions running through your mind. Who should get possession of your home? Who should run the family business? Will you create a college fund for your grandkids? What charity should you donate to? The options can be dizzying.
Before you get too wrapped up in the specifics of your estate, it’s worth exploring your options. In many cases, a trust may be a better option than a will. Obtaining a thorough understanding of the differences between a will and a trust is a good starting point.
Almost everyone is familiar with wills. They are often featured in movies and television shows as a point of drama. The specific benefits and drawbacks of a will are a bit more complex than pop culture showcases. When it comes to distributing assets, a will is often a good choice. They’re fairly easy to create and execute. Wills allow you to name beneficiaries for your estate and guardians for your children. They also offer you the chance to outline any final wishes you want to be carried out upon your death. Wills are also easy to update and change, should your priorities shift.
The drawback? Wills are not private, meaning your wishes, assets, and beneficiaries will be made public upon your death. They are also easier to contest. Even families not prone to fighting can find themselves arguing over the inheritance to which they feel entitled. The often lengthy and expensive court-supervised process of distributing your assets according to your will (i.e., the probate process) puts your wealth and family dynamics center stage – something most people would rather avoid.
If privacy is a concern, you may wish to create a trust instead of a will. While the creation of a will is more affordable upfront, trusts allow assets to be distributed privately, without costly court involvement. Trusts also allow for asset protection for your beneficiaries. If you are worried about a beneficiary’s inheritance being swallowed by bankruptcy, collection agencies, lawsuit, or substance abuse issues, you’ll want to opt for a trust over a will. They also offer extra protection for those beneficiaries who are minors or receiving government benefits.
Both wills and trusts distribute your assets upon your death. Trusts, however, also allow for the control your assets while you’re still alive. As the current trustee and beneficiary, there isn’t a large difference in how you access and manage your assets. With a trust, you can appoint a successor trustee to handle your affairs if you become incapacitated or need additional assistance as you get older. On the other hand, a will may be more appropriate and affordable for those without many assets to manage.
Regardless of which option you choose, educating yourself on the differences between a will and a trust is a great place to begin. We can help answer specific questions you have about your options. There’s truly no better way to prepare for the unexpected than by meeting with a professional to organize your plans!