When considering your estate plan, you may be wondering whether you should create a trust or draft a will. They both deal with the distribution of your assets when you die, but there are distinct differences. You should make and include both to cover all end-of-life decisions to make things easier for your family members at a difficult time.
A will and a trust are not the same things, and there are distinct differences and advantages to including both in your estate plan. Both are legal instruments with instructions on the disposition of your assets and property after you die. Here, we’ll explain the difference in depth.
The Will
Also called a “last will and testament,” this document explains how you’d like your assets distributed after death. Will also include your chosen executor as well as your other wishes. You can include your final arrangements, i.e., funeral, burial, cremation, etc. If you have minor children and/or pets, you can also name their guardians. The will does nothing until the person dies, and then it becomes active.
A will may be enough for a simple estate. Wills are easier but must go through probate—a court process—before any assets or property are distributed. Probate can take months, and your will is also public. Nothing is confidential because anyone can find out what’s included unless the will is sealed by the court.
A will may also be contested, leading to additional litigation. This could mean the depletion of assets and changes in beneficiaries. If the will is set aside, the probate court may proceed as if you died without a will, or “intestate.” The state becomes the executor and distributes your assets, likely not in the way you intended.
The Trust
This is a legal instrument that provides for the management of your assets during your life and distribution after your death. Unlike a will, a trust is effective immediately, does not go through probate, and you can begin moving assets and property into it right away.
Trusts can also be used to set provisions for your wishes should you become incapacitated, or unable to make your own decisions. Your spouse, children, or other loved ones won’t have to make difficult decisions not knowing what you would have wanted. You’ll put these wishes into writing for your lifetime, not just for your passing.
Anyone who has assets to distribute after their death can benefit from a trust. While trusts are mostly associated with very wealthy individuals, the truth is anyone can have one or more trusts that hold assets. At the time of death, all remaining assets are easily transferred to the beneficiaries in accordance with the trust’s documents.
Trusts are one way to reduce the number of assets in the estate. One of the biggest benefits is that anything transferred into a trust does not have to go through probate court as a will does. This makes the transfer faster and easier and keeps everything confidential. The beneficiaries and their assets are never made public like they would with a will.
What about assets that were not included in the trust? A Pour-Over Will can move anything into the trust that wasn’t added previously. When the grantor dies, the will directs the assets into the trust. This includes property that’s owned outside of the trust, and anything that would be included in the will.
If you:
• Own a business
• Have a large estate
• Want to keep your transfers private
• Want to avoid much of your taxable estate going through probate
Trusts will better help you manage these assets and set up distribution at the appropriate time.
Which One Is Better?
One isn’t better than the other because they’re not exactly alike. There are similarities, but both have distinct functions. You can have a will and one or more trusts to cover the distribution of your assets after you pass.
Much will depend on the circumstances of the estate. An assessment of the estate is the first step to determining what’s needed to make the best decisions for your needs.
Call Provenza Law To Review And Update Your Estate Planning
If you haven’t reviewed your estate plan in a year or more, now is a great time to review your plan and make any necessary updates.
James C. Provenza is a leading Illinois estate planning attorney with years of experience helping clients with estate planning to make sure their wishes are carried out. Call our firm today at (847) 729-3939, or use our online contact form to make an appointment. We’ll help you decide which will fit best into your overall estate plan.
