When discussing estate planning for individuals, most have heard the terms “will” and “trust,” but not everyone knows the differences between the two. Both are useful estate planning devices that serve different purposes, and both can work together to create a complete estate plan. Both legal documents allow you to provide for the ultimate disposition of your assets upon your death.
While it’s always wise to contact advisors like those at Vesta, it is also important to understand the basics between “wills” and “trusts”. Here’s a quick and simple reference guide:
Benefits of Revocable Trusts vs. Wills
- Avoid probate. The probate process, designed to wrap up a person’s affairs after satisfying outstanding debts, is public and can be costly and time-consuming – taking months and sometimes years to resolve. Property titled in the name of a revocable trust does not pass through probate. Property that is not titled in the name of a revocable trust transfers to heirs using a will and guarantees probate if your estate is over $50,000 in Wisconsin.
- Protect you from court challenges. Because assets transferred at death via a will go through the probate process, which is a court process, there is a more readily available chance to challenge the terms of the will in court. Although court challenges to wills and trusts occur, attacking a trust is generally much harder than attacking a will because trust provisions are not made public.
- Avoid a guardianship. A revocable trust can allow you to authorize your spouse, partner, child, or other trusted person to manage your assets should you become incapacitated and unable to manage your affairs. Wills only become effective when you die, so they provide no benefit if you become incapacitated, thus they do not help in avoiding a guardianship.
- Maintain privacy after death. Wills are public documents; trusts are not. Anyone, including nosey neighbors, predators, and unscrupulous “charities” can discover the details of your estate if you have a will. Trusts allow you to maintain your family’s privacy after death.
Benefits of Wills vs. Revocable Trusts
- Name guardians for children. Only a will – not a revocable trust or any other type of document – can be used to name guardians to care for minor children.
- Specify a personal representative. Wills allow you to name a personal representative – someone who will take responsibility to wrap up your estate after you die. This typically involves working with the probate court, protecting assets, paying your debts, and distributing what remains to beneficiaries. But, if there are no assets in your probate estate (because you have a fully funded revocable trust), this feature is not necessarily useful.
Similarities Between Wills and Trusts
- Allow revisions to your document. Both wills and revocable trusts can be revised whenever your intentions or circumstances change so long as you have the legal capacity to execute them.
- Name beneficiaries. Both wills and trusts are vehicles that allow you to name beneficiaries for your assets.
- Distribute assets. Wills simply describe assets and proclaim who gets what. Only assets in your name will be controlled by a will. While trusts act similarly, you must go one step further and “transfer” the property into the trust – commonly referred to as “funding.” Only assets in the name of your trust will be controlled by your trust.
- Provide asset protection. Trusts, and less commonly, wills, are crafted to include protective sub-trusts which allow your beneficiaries access but keep the assets from being seized by their creditors such as divorcing spouses, car accident litigants, bankruptcy trustee, and business failure.
Ultimately a solid estate plan that utilizes a revocable trust will also include a will that names the revocable trust as the beneficiary of your estate. Thus, if an asset does not get transferred to your trust while you are living, it will still, unfortunately, go through the probate process, but will be distributed with the balance of your estate by the terms of your trust.
While some of the differences between wills and trusts are subtle; others are not. Together, you and your Vesta advisors can take a look at your goals as well as your financial and family situation and help you figure out the estate plan that right for your needs. Call us today and let’s get started.
