Will vs. Trust: Which is Right for Your Estate Plan?
By: Bryan Norton
Having a will doesn’t always ensure your wishes are fulfilled without complications. If you’re wondering about the differences between a will and a trust, you’re not alone. While this may differ from state-to-state, understanding these distinctions can clarify how each document fits into your estate planning strategy. Here’s a look at the basics of each tool.
What a Revocable Living Trust Can Do—That a Will Cannot
A Revocable Living Trust is often considered one of the best ways to manage your assets outside of probate, ensuring they’re distributed as you wish without delays.
1. Avoid Conservatorship and Guardianship: A revocable living trust lets you name a spouse, partner, child, or trusted individual to manage your assets if you become incapacitated. This avoids court-ordered conservatorship and/or guardianship proceedings, which a will cannot prevent because it only becomes effective after death.
2. Bypass Probate: Probate is the court process necessary to settle a decedent’s estate and transfer property. It can be a lengthy, costly, and is open to the public. Assets in a revocable living trust don’t go through probate, meaning they pass directly to beneficiaries.
3. Maintain Privacy After Death: A will is a public document, meaning its contents—including your assets and beneficiaries—are accessible to anyone. A trust, is not public and keeps these details private, protecting the privacy of you and your loved ones.
4. Reduce Court Challenges: Although wills and trusts can both be challenged, attacking a trust is generally more difficult. Because trust provisions aren’t public, it’s harder for others to scrutinize and challenge them.
While trusts offer these advantages, they only protect assets that are properly transferred into them. Here’s what a will can accomplish that a trust typically cannot.
What a Will Can Do—That a Revocable Living Trust Cannot
A will remains an essential part of estate planning, even if you also utilize a trust, to cover areas that a trust may not address, particularly the roles and responsibilities following your death.
1. Name Guardians for Minor Children: Only a will can be used to name a guardian to care for minor children in the event of your death. While some states allow an additional document to designate a guardian, a revocable living trust cannot do this.
2. Appoint an Executor or Personal Representative: A will allows you to designate an executor/personal representative to settle your estate. This person gathers assets, pays debts, and distributes the remaining property to beneficiaries. However, if all your assets are in a fully funded revocable trust, the role of executor may be less critical.
These functions really important, so ensuring that you have a will that works with your trust is critical to cover these unique roles.
What Both a Will and a Trust Can Do
Some features are shared by both wills and trusts, allowing them to accomplish similar goals but in different ways.
1. Allow Revisions: Both a will and a revocable living trust can be revised during your lifetime as long as you remain mentally capable. (Note: Irrevocable trusts, which are outside this discussion, generally can’t be changed without legal intervention.)
2. Designate Beneficiaries: Both a will and a trust let you specify who will receive your property. However, they operate differently:
• A will simply lists your assets and assigns beneficiaries. Only property held solely in your name will be distributed by your will, while assets with a beneficiary designation (such as retirement accounts or life insurance) will bypass the will.
• A trust, on the other hand, requires you to “fund” it by transferring ownership of specific assets, like real estate, into the trust. Only those assets titled in the name of the trust will be managed according to trust provisions.
3. Provide Asset Protection: While both documents can include protective sub-trusts, trusts are more commonly used to offer protection. Trust sub-structures, such as spendthrift provisions, shield assets from beneficiaries’ creditors, including divorcing spouses, litigants, or creditors.
Why Choose Both?
The differences between a will and a trust, while sometimes subtle, are significant. A comprehensive estate plan will usually include both, ensuring all aspects of your wishes are covered.
If you have any questions about a will or a trust, please contact McDonough Law Group to schedule a consultation.