As you create your estate plan, you’ll need to address a host of questions, for example: If something happens to you, who should assume ownership of your home? Who should run your family business? Can your estate serve as a college fund for your grandkids? What charities should receive your support?
Before you delve into the specifics, you’ll want to review your plan options. And in some cases, it may be smart to place your estate in the hands of a Trust, rather than a Will. Here are a few key differences between the two.
As you distribute your assets, a Will can be a reliable and familiar choice. We all recognize Wills from popular culture, and these types of plans are fairly easy to create and execute. Wills allow you to name beneficiaries for your estate and guardians for your children, and they offer you the chance to outline any wishes you want to be carried out upon your death. Wills are also easy to update and change during your lifetime.
But unfortunately, Wills are not private, meaning your wishes, assets, and beneficiaries will be made public upon your death. Wills are also easier to contest then trusts, so even families not prone to fighting can tumble into arguments over your inheritance. 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 in a public spotlight – something most people would rather avoid.
If privacy is a concern, something of paramount importance for those with children, consider creating a Trust instead of a Will. While a Will may be somewhat less expensive to establish, at least at the outset, Trusts allow assets to be distributed privately and free of costly court involvement. Trusts provide your beneficiaries with a measure of asset protection, so if you’re worried that you inheritance will be reduced due to bankruptcy, collection agencies, lawsuits, or substance abuse issues, you’ll want to opt for a Trust over a will, which will better guard the contents of your estate from predators and creditors. Trusts also offer extra protection for minor beneficiaries or those receiving government benefits.
Both Wills and Trusts distribute your assets upon your death. Trusts, however, also let you control your assets while you’re still alive. 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. A Trust can save your family from a very stressful and expensive conservatorship proceeding (i.e., a lifetime incapacity court proceeding). 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, start by educating yourself on the differences between a Will and a Trust. Our team of professional estate planning advisors can answer questions you have about your options. There’s no better way to prepare for the unexpected than by meeting with a professional and creating a plan!