The Difference Between a Will and a Trust

When it comes to end-of-life planning, two terms that often come up are wills and trusts. While both are essential tools for managing your estate and ensuring your wishes are carried out, they serve different purposes and work in distinct ways. Understanding the difference between a will and a trust can help you make informed decisions about your estate planning.

Here’s a breakdown of each, including what they do and don’t do, so you can decide which might be right for you.

What is a Will?

A will is a legal document that outlines how you want your assets and property distributed after you pass away. It can also specify guardianship for minor children, name an executor to manage your estate, and address your wishes for funeral arrangements. In short, a will ensures that your intentions are clear to your loved ones and the courts.

What a Will Does:

1. Distributes Assets: A will directs how your property, savings, investments, and personal belongings will be divided among your beneficiaries.

2. Names Guardianship: If you have young children, a will allows you to appoint a guardian to care for them if both parents pass away.

3. Appoints an Executor: A will names the person responsible for managing your estate and ensuring your wishes are followed.

4. Sets Funeral Instructions: You can specify funeral and burial preferences in your will, giving loved ones guidance on how you’d like to be remembered.

What a Will Doesn’t Do:

1. Avoid Probate: A will must go through probate, the legal process where a court validates the will, settles debts, and distributes assets. This process can take time—sometimes months or even years—and may incur legal and administrative fees.

2. Address Incapacity: A will only takes effect after your death, meaning it doesn't address what happens if you become incapacitated and can’t manage your affairs.

3. Provide Immediate Access to Assets: Since a will goes through probate, your loved ones may not have immediate access to funds or property, even if they need it for funeral expenses or other urgent costs.

What is a Trust?

A trust is a legal arrangement where you (the grantor) transfer ownership of your assets to a trust, which is managed by a trustee for the benefit of your beneficiaries. Trusts can be structured in a variety of ways, allowing for more flexibility and control over how and when assets are distributed.

What a Trust Does:

1. Avoids Probate: One of the main advantages of a trust is that it avoids the probate process. Since the assets are transferred into the trust before you pass away, there is no need for court involvement in distributing those assets.

2. Provides Immediate Access to Assets: Because the assets are already in the trust, your beneficiaries can access them right away—without waiting for probate to be completed.

3. Allows for Detailed Control: You can set specific conditions for when and how your beneficiaries receive assets. For example, you can specify that a child only receives their inheritance at a certain age or after achieving certain milestones, such as graduating from college.

4. Addresses Incapacity: A trust can include provisions for managing your affairs if you become incapacitated. The trustee can step in and handle financial matters without the need for a court-appointed guardian or conservator.

5. Protects Privacy: A trust is not a public document, unlike a will, which becomes part of the public record once it’s filed for probate. This means your estate plan can remain private and out of the public eye.

What a Trust Doesn’t Do:

1. May Require More Initial Work: Setting up a trust can be more complicated and time-consuming than drafting a will. Trusts generally require a lawyer or estate planner to ensure the document is correctly structured and that assets are properly transferred into the trust.

2. Can Be Expensive to Establish: While a trust can save money in the long run by avoiding probate costs, the initial setup can be more expensive than a will, depending on the complexity of the trust and the legal assistance needed.

3. Not All Assets Are Automatically Included: In order for a trust to be effective, assets must be formally transferred into the trust. This includes bank accounts, real estate, and other properties. Failing to transfer assets could mean that they’re left out of the trust and subject to probate.

Key Differences Between a Will and a Trust

Definition

Will: A legal document that outlines how assets will be distributed after death.

Trust: A legal arrangement that holds and manages assets during and after your lifetime.

Activation

Will: Takes effect only after death.

Trust: Takes effect as soon as it’s created and funded.

Probate Requirement

Will: Must go through probate, a court process to validate the will.

Trust: Avoids probate, as assets are transferred directly to the trust beneficiaries.

Privacy

Will: Becomes public after death, as it goes through probate.

Trust: Remains private, as it doesn’t go through probate.

Control Over Assets

Will: Does not provide control after death. Once executed, assets are distributed according to the will.

Trust: Allows ongoing control over assets, even after death, through a trustee.

Ability to Manage Assets

Will: No control over assets after death.

Trust: Can manage assets during your lifetime and after your death if it’s a revocable trust.

Guardianship for Minors

Will: Can specify a guardian for minor children.

Trust: Can specify a guardian for minor children, but also manage assets for them until they’re older.

Changeability

Will: Can be changed or revoked any time during life, as long as you’re mentally competent.

Trust: Can be changed or revoked if it’s a revocable trust, but irrevocable trusts are permanent.

Cost

Will: Generally less expensive to set up.

Trust: More complex and expensive to create and maintain.

Asset Distribution

Will: Only distributes assets after death.

Trust: Distributes assets during life or after death, depending on the terms of the trust.

This comparison grid is for informational purposes only and is not intended as legal advice. The laws surrounding wills and trusts can vary by jurisdiction and individual circumstances. Please consult with a qualified attorney or estate planning professional to determine the best options for your personal situation.

Which Should You Choose?

Many people choose to have both: a will to cover basic distributions and guardianship, and a trust to manage more complex assets and provide for smoother distribution. Consulting with an estate planner or attorney can help you determine the right plan based on your unique needs and goals.

Disclaimer: We’re not legal professionals, and the content here is based on our own experiences, research, and the expert advice we've received. Our goal is to offer helpful guidance to get you started on your end-of-life planning journey. We’re here to make those conversations a bit easier, and while we aim to provide reliable information, this blog is not intended to serve as legal advice. We always recommend consulting with a qualified legal professional to finalize your plans.