When it comes to estate planning, two common tools often come to mind: wills and trusts. While both serve the purpose of distributing your assets after you pass away, they have distinct differences in terms of functionality, privacy and the level of control they offer over your estate.
Understanding the difference helps you choose the right solution for your needs.
What is a will?
A will is a legal document that outlines how you want your assets distributed after your death. It allows you to specify beneficiaries for your property, appoint guardians for minor children and designate an executor to manage the distribution of your estate. Wills are subject to probate, a court-supervised process that validates the will and ensures that your wishes get carried out.
What is a trust?
A trust, on the other hand, is a legal arrangement in which you transfer ownership of your assets to a separate entity. A trustee manages that trust for the benefit of your designated beneficiaries. Trusts are revocable or irrevocable, depending on whether you want to retain control over the assets during your lifetime. Unlike wills, trusts generally avoid probate, allowing for a faster and more private distribution of assets.
What are other key differences?
In addition to the difference in probate, wills and trusts have differences in privacy as well. Probate proceedings are public record, meaning that the contents of a will become accessible to anyone. Trusts, being private documents, keep the distribution of your assets confidential.
Additionally, with a will, you have limited control over how and when your assets get distributed after your death. Trusts offer greater flexibility and control, allowing you to specify conditions for asset distribution and even provide for the management of assets during your lifetime.
Understanding these differences can help you create a comprehensive estate plan that meets your unique needs and goals