Estate Planning Basics: Wills vs. Trusts
When it comes to protecting your assets and ensuring your loved ones are cared for after you’re gone, estate planning is essential. Two of the most common tools are wills and trusts, but many people aren’t sure how they differ or which one they need. Understanding the basics can help you make informed decisions that best serve your family’s future.
What Is a Will?
A will is a legal document that states how you want your assets distributed after your death. It can also name guardians for minor children and specify your final wishes.
Key points about wills:
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Goes through probate: This is a court-supervised process that validates the will and oversees asset distribution. It can be time-consuming and public.
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Simple & cost-effective: Drafting a will is generally straightforward and less expensive than setting up a trust.
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Takes effect after death: A will only becomes active upon your passing.
What Is a Trust?
A trust is a legal arrangement where one party (the trustee) holds and manages assets on behalf of another (the beneficiary). There are different types of trusts, but the most common for estate planning is a revocable living trust.
Key points about trusts:
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Avoids probate: Assets in a trust can be distributed directly to beneficiaries, skipping the lengthy probate process.
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Offers privacy: Unlike wills, trusts typically aren’t public record.
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Manages assets during life and after death: A trust can help if you become incapacitated by allowing your trustee to handle your affairs without court intervention.
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More complex & costly: Setting up a trust involves more paperwork and legal fees upfront.
Wills vs. Trusts: Which Do You Need?
It depends on your goals, the size and complexity of your estate, and your family’s needs.
| Factor | Will | Trust |
|---|---|---|
| Cost | Lower upfront cost | Higher upfront cost |
| Probate | Required | Avoids probate |
| Privacy | Public record | Generally private |
| Incapacity planning | Does not manage assets if you’re incapacitated | Can manage assets if you’re incapacitated |
| When it takes effect | After death | Immediately upon creation |
Often, Both Work Together
Even if you have a trust, you still need a pour-over will — a type of will that ensures any assets not titled in your trust at your death are moved into it. Plus, only a will can name guardians for minor children.
Tips for Getting Started
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Inventory your assets: List out property, investments, insurance policies, and any debts.
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Talk to loved ones: Make sure they know your wishes.
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Consult an estate planning attorney: They can help you determine the best combination of tools for your situation.
Final Thoughts
Estate planning might feel overwhelming, but taking the time now to set up a will, a trust, or both can save your family stress, time, and money later. It’s one of the most caring decisions you can make for those you love.
