There are many different documents that people can use when establishing comprehensive estate plans. Often, wills and trusts are among the first documents people consider drafting.
Depending on an individual’s circumstances and their estate planning goals, either a trust or a will may become the foundation of their estate plan. Understanding why people choose different documents can be beneficial for those thinking about their legacy and their protection in the future. What differences separate wills from trusts?
When the documents take effect
A will only has legal authority after its author dies. If an adult becomes incapacitated and cannot manage their own affairs, the will that they drafted has no authority.
Trusts, on the other hand, take effect as soon as an individual funds the trust. Trusts can protect people during their golden years or after incapacity, whereas wills only have legal authority during probate proceedings.
What the document can achieve
Wills and trusts can both provide guidance for the distribution of property to specific beneficiaries. Trusts can also limit when assets pass to beneficiaries and even how they use the resources received from the trust.
Trusts can also help people qualify for Medicaid later in life or protect assets from collection efforts or divorce. They can also enhance privacy by keeping resources out of probate court after an individual’s passing. Wills can provide an opportunity to name a guardian for minor children, which can be very important for those with children.
How complex their creation is
Wills can be relatively basic. They might name a specific person to serve as personal representative, identify an individual’s beneficiaries and then describe the preferred distribution of property.
Trusts, on the other hand, are typically far more complex. Individuals need to select someone competent to serve as their trustee. They need to include clear terms regarding the distribution of their property. The trustor has to select the type of trust that they form and may need to choose a successor trustee.
Both wills and trusts can be useful for those worried about their loved ones or their personal legacy. Understanding the main differences that separate wills from trusts can help testators select the best option available.
For some people, both drafting a will and funding a trust can be a smart estate planning choice. Other times, using only one of those tools can suffice. Establishing clear estate planning goals early in the process can help people select the best tools for achieving their goals.