Estate Planning is the truest of love letters to your family. But which type is right for your situation? In this article, I will review the basic differences between trust and a will. Hopefully, this will help you to be better-informed and make the best decision for your situation.
In almost all cases, I recommend a Revocable Living Trust (a “trust”) to my clients. It is better than a Last Will and Testament (“a will”) for a number of key reasons that I have outlined here.
But first, know that if you have an up-to-date will that properly reflects your wishes on end-of-life and possible incapacitation issues, you are a player in the ball game. This is very good and it may be that this is the right vehicle for your situation. First and foremost, what’s important is that you have up-to-date legal estate documents that express your wishes.
This is very, very important!
But let’s do better than good. For most people, having trust is the best solution. Let’s explore why.
A trust and a will both outline your wishes when you are unable to speak for yourself. However, a will is not used until your death, while a trust is more flexible and can be used to manage your wishes before you die. There are other differences. Let’s go over each one in more detail.
A will is a written, legal document that outlines how you want your assets distributed and your affairs settled after you die. It has some notable advantages to a trust:
- You can name guardians of minor dependents.
- It lets you appoint who gets jewelry, collectibles, heirlooms, and other personal items.
- It’s relatively easy to put in place.
- It usually costs less than a trust.
When you die with a will, the will must be examined by a court administrator and go through a legal process called probate. This is a process to authenticate and “prove” your will.
Probate requires your Executor/Personal Representative to take many court-monitored actions before the final distribution of your assets is made. It is a longer and at times, contentious process. Probate laws vary from state to state and some state laws make probate more costly and time-consuming than others.
Also, during the probate process, your will and your wishes are available to be read by anyone, a stranger or even an unhappy family member.
Importantly, because a will doesn’t come into play until death, it doesn’t handle incapacitation easily. if you become incapacitated, a will does not easily allow loved ones to make financial or medical decisions for you.
A trust is another method of estate transfer that determines where your assets go when you die. It is much more flexible than a will. Here are the main points.
- It becomes effective immediately.
- It can be changed as your circumstances change.
- You will name yourself a trustee and maintain ownership and control of the property owned by the trust while you are alive.
- If you become incapacitated, your named successor trustee (the person who you want to oversee your care) can easily step in and manage your care and your financial affairs.
- Upon your death, your successor trustee immediately takes over with no court probate proceedings. The property owned by the trust can pass directly and immediately to your beneficiaries.
- The terms of your trust are private, not public. It is much harder for someone to contest your wishes under the terms of a trust.
However, if you implement a trust, it does not mean you do not need a will. In fact, you should have… BOTH!
I urge you to consider trust because it makes things simpler for those you want to manage your affairs. Now I’m going to add a wrinkle and say you need both trust and a will. A will protects two things that a trust cannot.
Small Assets. Most of your assets (e.g., home) will be owned by the trust and will be easily handled upon your death. But your smaller personal items such as jewelry and artwork should be distributed through a will.
Guardians for your children (in most states). Supplementing your trust with a will is a must if you want to stipulate caretakers for your children. If you don’t spell this out, your children’s guardians and the type of care needed for them will be determined by the court system. A family member could become a guardian, but they may have to endure lengthy court proceedings, sometimes with court oversight. If you have dependents, you can avoid all this with a will!
So… you need both!
Show your love for your family by taking the time to think through your end-of-life issues now.
Life is busy and planning for end-of-life issues isn’t the first thing on most people’s to-do list. This is why so many people –even smart, wealthy people–have done no estate planning whatsoever. Many others with such documents have not looked at their plans in many years.
I understand! I avoid it too. But being intentional about your legacy and deciding what will happen to your assets after you are gone can be a great gift to those you leave behind.
Estate planning is about caring for others and it is an important part of your life’s story. Take the time to think about what will happen to your assets (your wealth, your possessions, and your values) after you’re gone. Go over your estate document options, then implement the necessary documents to cover this part of your story! Whether you choose a trust or a will (or both!), you will do your family and your legacy a great service!
Let your estate planning become a chapter of your life story. Do it well, with intentionality, and it will become a love letter to your family.
Next Up: Estate Planning Basics, Part 2: The Perfect (or, Ideal) Trustee(s)
Please reach out for a conversation or question, or if you want a partner who can guide you through implementing or updating your estate documents, and help you make smart financial decisions while doing so.
Estate Planning Basics, Part 2: The Perfect (or, Ideal) Trustee(s)
- What is a Trustee?
- Trustee defined
- Types of Trustees
- The role of a Trustee
- After death
- During incapacitation
- The duties and compensation of a Trustee
- Why is a Trustee so important?
- Who/what is the “perfect” trustee?