As an adult, it is wise to prepare for your demise. You should take time to think about what becomes of your estate after your passing. You must take conscious steps to preserve your legacy and leave something worthy for your heirs. 

“Estate planning is one of the most valuable ways to protect your assets and legacy. However, with the numerous estate planning options available, you can easily feel overwhelmed about the right path to take. That is why you need an attorney’s guidance to create an acceptable estate plan,” says attorney Sasha Begum of Begum Pelaez-Prada, PLLC.

Wills and trusts are the two most crucial parts of estate planning. While these concepts are not new, most people don’t understand their differences. 

This piece aims to differentiate between trusts and wills to enable you to understand the ideal of choosing to preserve your assets and legacy:

Understanding What a Will Entails

A will is a legal document containing instructions on how to share your assets after your demise with designated heirs and beneficiaries. It may also contain clear-cut instructions for cases demanding decisions after your passing. For example, your will may contain the directives for an appointment of a guardian for your minors or how you want your burial and funeral to be conducted. 

A will only becomes legally valid after being signed and witnessed. Similarly, your will becomes actionable after filing it with the probate court in your jurisdiction. Your executor should be in charge of the process. 

Your will will be publicly available in the court in charge of its execution and hearing of disputes. Anyone who needs to challenge its content can approach the court. 

The Meaning of a Trust

A trust is an arrangement between two entities. One entity (the trustor) gives the other individual (the trustee) the right to hold the title to property or assets for a third party, also known as the beneficiary. 

The trustee is a fiduciary who oversees the trust assets for the beneficiaries’ benefit. The terms of the trust document are the trustee’s guiding compass. 

Many use a trust to legally protect their assets and ensure equitable distribution of the assets. This method reduces tax burden, saves time, and eliminates legal complexities.

The Main Differences Between Trusts and Wills

As explained above, trusts and wills are estate planning tools to help handle your affairs after your demise. However, they are distinctively different in several ways. Knowing these differences will help you make an informed decision and understand what works best for you.

Below are the primary differences between a trust and a will:

Date of Execution

A will only become actionable after your demise. However, some trust types, especially living trusts, become implementable after creating and funding them. 

Thus, those who are psychologically unstable can direct their estate to a beneficiary. It offers a form of protection to the trustor. However, you cannot enjoy this benefit with any form of will.

The Process of Probate

Your will must undergo probate, whether you had a will or not, before your death. Probate is an inevitable legal process for sharing a deceased’s assets after their passing. A probate court often oversees the will.

The court ensures that your executor shares your assets according to the terms of the will. A probate procedure is costly and complex in some jurisdictions. The process is much more complex if you die without a will, as the authorities have to activate longer processes to validate assets and beneficiaries.

That is why many prefer trusts instead. Trusts don’t need to pass through probate courts. Hence, your beneficiaries can seamlessly receive your assets without the cumbersome procedures.

Complex Process and Cost

Generally, a trust demands more paperwork to create. Invariably, it is more expensive to prepare a trust upfront than a will. However, a trust is usually cheaper in the long run because you will not eventually need a probate. This offsets the cost of setting up a trust in the first place. 

You cannot create a living trust unless you constantly fund one. This means that you should appropriately title the different assets included in your trust accounts. This process can be somewhat complicated, especially for those with multiple assets. However, an estate planning attorney can help demystify the process and make it seamless.

Finding a lender to refinance a property held in a trust may also become challenging. Some lenders may evaluate the trust agreement during the refinancing procedure, while others may tell you to eliminate the property from the trust. 

Conversely, it is easier to prepare a will. You do not necessarily need to involve an external body to prepare a legal will. You can even take advantage of software programs to prepare to draft an acceptable will. 

You will only need the witnessing of two mentally stable adults who know you well for it to become valid. However, some states demand that your will be notarized to become valid and legal. Consult a local estate planning attorney to learn the regulations. 

The Need for Privacy

Trust proceedings are private, unlike probated wills that become public records immediately. Anyone can access the details of your probated will. Thus, you should go for a trust if you desire privacy in your financial details.

Rate of Maintenance

Because of its complexity, you need to maintain your trust regularly. It must also be up to date with all your assets to be useful. Hence, you need to immediately transfer all your new acquisitions, such as a new bank account, car, and house, into your trust.  

However, wills stand out due to their low maintenance. You can decide to update your will every three to five years or after a significant milestone. 

Legal Priority 

Despite their similarity in asset management, trusts and wills are products of different laws. While the former is governed by contract law, testamentary law governs the latter. Contract law is stricter, making trusts take precedence over wills. 

Furthermore, trusts become actionable immediately after being raised. You can also fund and update your trust throughout your lifetime. On the other hand, a will loses its potency or validity after your death. Thus, the ongoing nature of a trust gives it an edge over a will.

Legal Tussle

If you decide to go for a will due to its low maintenance, you should also be conscious of the risk of being outdated after your demise. The risk of a will being contested or challenged is high. People can argue that the will is outdated or you were not mentally stable when preparing it. 

Conversely, it is difficult to successfully challenge a trust because of its ongoing nature. Technically, the assets no longer belong to the trustor. 

While creditors can claim against wills and trusts, the claims process against a trust is more daunting. More so, it is almost impossible for a creditor to claim against your trust when you set up an irrevocable trust. 

Parting Words

Your circumstances and preferences determine the ideal estate planning tool for you. You can settle for a will if your estate is simple and small. However, you should go for a trust if you have a complex estate and want to keep your financial information private. 

If you want to enjoy the benefits of both, you can go for both. Speaking with a local estate planning attorney is crucial to advise you on the ideal way to go. They will enlighten you on what works best for your situation.