When diving into estate planning, two key terms you’ll encounter are “will” and “trust.” Understanding the differences between these two tools is crucial for protecting your family and assets.
What is a Will?
A will is a legal document that specifies how your assets will be distributed after your death. It doesn’t take effect until you pass away. Wills also allow you to name guardians for your children, appoint an executor for your estate, and declare your final wishes.
What is a Living Trust?
A living trust, or revocable living trust, becomes effective immediately upon signing and funding it. This means you transfer assets to the trust, making the trust the owner. Living trusts are private documents that can help you avoid or minimize probate, which can be a lengthy and costly process.
Wills vs. Trusts: Key Differences
- Timing: Wills only take effect after your death, while living trusts are effective immediately upon signing and funding.
- Complexity: Setting up a living trust can be more complex and costly, but it offers privacy and can avoid probate.
- Functionality: Wills can name guardians for minor children and specify your final wishes, whereas living trusts manage and distribute your assets both during your lifetime and after death.
Choosing Between a Will and a Living Trust
It’s not about choosing which is better but understanding their specific benefits. Your choice should depend on your unique situation, goals, and needs. Often, a comprehensive estate plan includes both a will and a trust.
Can You Have Both a Will and a Living Trust?
Yes, you can. Trusts manage and distribute assets, while wills can address guardianship, executor appointments, and other final wishes. Many living trusts include a “pour-over will,” which ensures any assets not initially included in the trust are transferred to it upon your death, acting as a backup plan.
What is a Living Will?
A living will is different from both a last will and a pour-over will. It relates to your medical decisions, outlining your wishes for medical care if you become unable to communicate them yourself.
Planning for the future is important on so many levels, but the process can seem overwhelming — where do you even start? There are a lot of pieces to the puzzle, and too often people think “I’ll get to it later…” That’s risky. If you become unable to make decisions on your own, and you haven’t put a plan into place, all that burden and stress will fall on your loved ones. Creating an estate plan is a true gift to your family and friends.
Get started today, worry less tomorrow.
