Wills and trusts are two of the most commonly used estate planning documents; they form the foundation of most estate plans. While both documents are legal vehicles designed to distribute your assets to your loved ones upon your death, the way in which they work is quite different.
Here are some of the key differences between wills and trusts you should be aware of.
When they take effect
A will goes into effect when you die, while a trust takes effect as soon as it’s signed and your assets are transferred into the name of the trust, known as “funding” the trust. A will directs who will receive your assets upon your death, while a trust specifies how your assets will be distributed before your death, at your death or at a specified time after death. This is what keeps your family out of court in the event of your incapacity or death.
A will offers no protection if you become incapacitated, and your family may have to go to court to appoint a conservator or guardian, resulting in expense and stress.
A trust allows you to appoint someone you choose to handle your assets if you become unable to do so. When combined with a well-drafted medical power of attorney and living will, it avoids court involvement and ensures your medical wishes are followed.
How they are administered
In order for assets in a will to be transferred to a beneficiary, the will must pass through the court process known as probate. During probate, the court oversees the will’s administration, ensuring your assets are distributed according to your wishes, with automatic supervision to handle any disputes.
Probate proceedings can drag out for months or even years. They are public proceedings and your family will likely have to hire an attorney to represent them, which can result in costly legal fees that can drain your estate.
Bottom line: If your estate plan consists of a will alone, you are guaranteed your family will have to go to court if you become incapacitated or when you die.
Unlike wills, trusts don’t require your family to go through probate, which can save them time, money and the potential for conflict. Plus, the distribution of your assets held in a trust happens in the privacy of an attorney’s office – not the courtroom – so the contents and terms of your trust will remain completely private.
How much they cost
Wills and trusts do differ in cost – not only when they’re created, but also when they’re used. The price difference between a will and a trust could be quite a few thousand dollars. So at least on the front end, wills are less expensive than trusts.
However, keep in mind that wills must go through probate, where attorney fees and court costs can be quite pricey, especially if the will is contested. So even though a trust may cost more upfront to create than a will, the total costs once probate is factored in makes a trust the less expensive option in the long run.
When deciding which estate planning option is right for your family, it is essential to consult with an attorney, which will help you to make informed decisions that align with your unique situation and budget, providing peace of mind that your estate plan is well-suited to your needs.
Estate planning is not just about drafting documents; it is about making informed decisions that safeguard the future of your loved ones.
This article is provided by your local estate planning attorney, Corina Colan.
The Law Office of Corina I. Colan| (909) 265-3315 | [email protected] | www.colanlegal.com