A major concern in estate planning is the difference between a trust and a will. This can be a difficult conversation, as it involves death and assets. Yet avoiding the discomfort of the conversation can lead to long-lasting family and legal drama. Expert estate planning can make this process more accessible, and knowing the difference between a trust and a will is an essential part of this undertaking.
There are many reasons to create an estate plan earlier in life. One reason is that it will save money, stress, and time for your loved ones, especially when they need time to grieve. In addition, having plans laid out can prevent potential family and business disputes. You can also support your favorite cause and leave a legacy with a predetermined donation.
Knowing you have a plan, whether an estate plan, a will, or a trust, can give you peace of mind.
What Is Estate Planning?
Estate planning helps you prepare for the end of life by determining where your assets will go once you pass. These assets can include your business, property, and personal assets. Estate planning addresses:
- Inventory of your tangible and intangible assets
- Accounting for your family
- Writing a will
- Determining legal directives such as medical care and power of attorney
We suggest hiring an estate planning attorney to ensure you align with Minnesota State laws, and your family does not need to worry about the legalities once you have passed.
Before you hire an attorney, researching the differences between a trust and a will allows you to approach the topic with some baseline understanding.
What Is a Trust?
A trust (also known as a living trust) specifies how you want your assets handled upon death. With a trust, you will transfer your interest in your properties and assets to the trust while you live.
A trust becomes active once it is signed and funded. Therefore, you can modify a revocable trust while you are still alive. However, you cannot change an irrevocable trust once it has been signed and funded.
Once you have died, your assets will go to your designated beneficiaries without probate. A trust can save your beneficiaries from going through a potentially complicated and time-consuming process.
What Is a Will?
It’s important to understand that there are different types of wills.
First, a last will and testament will direct how you want any property distributed upon death. A last will and testament can also instruct to whom you wish any minor children to go if there is no surviving parent.
A living will specify what you wish for regarding healthcare and forms an advanced directive. In addition, it declares who is allowed to make healthcare decisions for you if you become incapacitated.
Both of these types of wills are subject to probate. The probate process can be confusing, expensive, and involved for your beneficiaries. So, it is crucial to determine if a will is the best option.
One will that is not subject to probate is a pour-over will. A pour-over will work in conjunction with a trust. It authorizes any assets remaining when you pass to be given to the trust and handled accordingly.
What Is the Difference Between a Trust and a Will?
There are two significant differences between a trust and a will:
- A trust is in effect while you are alive, whereas a will becomes active upon death.
- Assets in a will go through probate upon your death. In contrast, assets are distributed according to the already determined declarations of a trust.
Other differences to consider are as follows:
- States where you want your assets to go.
- Declares how you would like final arrangements executed.
- Identifies guardians for minor children and pets.
- Is on the public record.
- Can be revocable or irrevocable.
- Puts into place provisions for if you become mentally or physically unable to make decisions.
- Ensures that legal and family proceedings follow your wishes after death.
- Is not on the public record.
Is a Trust or a Will Better Than the Other to Have?
Both a trust and a will have different and specific uses. It is not that one is “better” than the other; it is need-based.
Reasons You May Want a Trust
There are a few benefits to a trust that may make it the most suitable option for you.
- Your beneficiaries can skip the probate process with a trust in place.
- You should consider setting up a trust if you have a complicated estate.
- If you own real estate in multiple states, you should consider a trust so each property doesn’t go through probate.
Reasons You May Want a Will
A will also has a few specific characteristics that you may find advantageous.
- A will allows you to choose an executor for your estate.
- A will is sufficient if you have a smaller estate.
- A will can name a guardian for your minor children and pets.
- You can state whether you want to leave something to an unregistered domestic partner, a friend, or an organization in a will.
Can I Have Both a Trust and a Will?
You can have both a trust and a will, but you should be clear on what type of will works best with a trust. A pour-over will essentially guarantee that anything you own outside of the trust is paid to your trust once you die. A pour-over will ensure that all your assets go to your trust and stay out of probate. In addition to a living trust and pour-over will, it is best to have a living will in place for your healthcare needs.
Working With an Attorney Can Ease the Process
This process can seem overwhelming to anyone, especially if you are trying to establish a trust or will when you are under duress. But it can be made simpler. An attorney helps you make educated decisions about your business, property, and assets. They can also help to reduce estate taxes and ensure that your family is well cared for. We suggest you contact CJB Law today to discuss what you and your family may need for estate planning and whether or not you need a trust or a will.