Will vs trust is one of the most common comparisons that comes up in the world of estate planning.
In this article, we’re going to directly compare these two options and share the important nuances of each. We will also be answering common questions we receive about wills and trusts and sharing how you can move forward with making a decision.
Of course, prior to making a decision, you should speak with a qualified estate planning expert that understands your situation and the variables that could impact your plans.
This article is part of our free series on banking, estate planning, and the legal documents that surround them, including a free detailed guide to opening a private bank account for yourself and your family members.
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- Will vs Trust
- What Is the Advantage of a Trust Versus a Will?
- Should I Have Legal Trusts?
- Frequently Asked Questions
- Do You Want Help Opening Bank Accounts?
Will vs Trust
The main difference between a will and a trust is that a will is a legal document that outlines a person’s wishes for their assets while a trust is a legal entity that a person transfers their assets to.
After death, the distribution of assets outlined in a will is overseen by the probate process in court while the distribution of assets transferred to a trust is managed by a trustee.
That said, there are similarities between a will and a trust as well. First, both a will and a trust are used in estate planning and they both relate to inheritance and asset distribution to a beneficiary (or beneficiaries).
That said, there are different types of trusts. And, certain trusts have more similarities to wills than others. For example, a revocable trust (also known as a living trust) provides the grantor of the trust with control over the assets that they contribute during their lifetime, similar to a will. Additionally, a revocable trust still faces estate tax, like those assets in a last will and testament.
That said, after the grantor of a revocable trust dies, the trust automatically converts to an irrevocable trust. This then results in the final state of the trust remaining unchanged prior to distribution.
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What Is the Advantage of a Trust Versus a Will?
There are a number of advantages to using a trust versus a will. The first major advantage is that it allows the distribution of assets to avoid probate and instead allows assets to be distributed by a trustee as directed by the grantor.
What Are 3 Advantages of Trusts Over Wills?
Three advantages of trusts over wills include (1) the ability to avoid the probate process and have assets distributed immediately by the trustee, (2) enhanced privacy as assets are transferred to the ownership of the trust, and (3) flexibility in terms of how trust assets are distributed because trusts can include specific instructions for managing assets even after their passing.
What Are Trust Assets?
Trust assets refer to the assets that are legally transferred into a trust by a grantor. These assets are then designated for distribution to the beneficiaries of the trust at the time of the grantor’s passing. Examples of trust assets can include financial assets, real estate, personal property, and much more.
What Assets Cannot Be Placed In a Trust?
The assets that cannot be placed in a trust include various tax-sheltered financial accounts like an IRA, 401k, HSA, 529, in the case of the United States. Additionally, government benefits programs are not eligible for trust contributions. Another example of assets that cannot be placed in a trust includes motor vehicles, which are not eligible to be transferred to a trust in most jurisdictions.
Should I Have Legal Trusts?
Whether you should have a legal trust will depend on your personal circumstances, objectives, and future plans. In most cases, a trust can offer flexibility, easier administration, and more clarity surrounding your specific desires for distribution.
However, trusts are also more expensive than a will to arrange and manage. So, they may not be suitable if you do not have the financial means. That said, whenever deciding between estate planning options, it’s important to speak to an estate planning professional in order to consider all of your options.
Frequently Asked Questions
Below are a few of the most common questions we receive from people looking into a will vs trust. If you have further questions you would like to ask our team, don’t hesitate to get in touch.
Which Is Better: a Trust or a Will?
Whether a trust or a will is better for your circumstances will depend on your objectives, assets, beneficiaries, and resources. In order to review your options and choose which option is best for you, you should speak with an estate planning professional.
What Is Estate Wealth Planning?
Estate wealth planning is another name for wealth management. Wealth management combines several professional domains, including banking, law, asset management, investment management, philanthropy, and more. When an individual engages in estate wealth planning, they will receive advice about the best wealth management structures for their needs, including considerations for both wills and trusts.
What’s a Living Trust?
A living trust refers to a trust that offers the grantor a level of control during their lifetime. In fact, a grantor can make changes to the trust, ranging from removing assets to changing beneficiaries and more prior to their death. After the grantor dies, a living trust converts to an irrevocable trust.
Living Trust vs Will: Which Is Better For You?
Whether a living trust or a will is better for you will depend on your resources, the related assets, the number of beneficiaries, and the resources you are willing to invest in the process. Likewise, if you want the distribution of your assets to avoid probate and oversight by a court you may want to consider a living trust instead of a will.
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