What’s the difference between a Will and a Trust?
When planning for the future, one of the most important decisions you’ll make is the mechanism by which your assets are distributed after you pass away.
Two of the most common estate planning tools are wills and revocable trusts, but in practice they often operate very differently, with varying implications for your loved ones.
Understanding the key distinctions between a will and a trust is the first step toward building a comprehensive and cost-effective estate plan.
What is a Will?
A will is a legal document that directs how your assets should be distributed after your death. It also allows you to nominate guardians for minor children and appoint a personal representative to oversee the administration of your estate.
However, a will does not avoid probate. In fact, a will is best imagined as your entry ticket to the probate court, where your loved ones will have to probate your estate. Probate is the court-involved process of authenticating your will, granting the individual in charge of your estate (referred to as a Personal Representative) to gather up your assets and pay your debts, and eventually distributing whatever remains after filing fees, attorneys fees, and CPA fees.
Probate is time-consuming, expensive, and entirely public. In Massachusetts, the process takes at least a year from the date of one’s death, and involves court filings, attorney fees, and mandatory waiting periods before assets can be fully distributed.
In conclusion, having a will based estate plan is better than no estate plan, but it is likely to result in a cumbersome, public, and expensive administration process after you pass away.
What is a Revocable Trust?
A revocable trust, sometimes called a living trust, is a flexible estate planning tool that allows you to transfer ownership of your assets into a trust during your lifetime. You typically serve as your own trustee while you're alive and competent, and name a successor trustee to manage the trust after your death or if you become incapacitated.
Unlike a will, a properly funded revocable trust allows your estate to bypass the probate process entirely. This means your assets can be distributed privately, efficiently, and without court involvement. A trust also provides for seamless management of your affairs if you become incapacitated, which is something a will cannot do.
Is a Trust better than a Will?
Yes, for most individuals, a trust is typically the best estate planning vehicle to utilize. This is because a trust-based estate plan offers cost savings down the road while providing a comprehensive structure for your estate, along with legally binding instructions for your loved ones to follow in the event of your incapacity or death. A will can be a good option for an individual with no estate plan or with very few assets, but may end up costing more to administer when compared to a revocable trust.
Which Option Is Right for You?
While a will may appear appropriate for individuals with modest estates and straightforward family situations, most people find that a revocable trust offers greater control, privacy, and peace of mind, particularly when avoiding probate and making it easy on your loved ones from an administrative perspective are priorities.
Over the next four posts in this series, we’ll explore in more detail the specific potential advantages of using a trust, including:
Avoiding probate;
Minimizing estate tax liability;
Protecting beneficiaries from creditors or divorce; and
Shielding the family home from estate recovery.
Ready to Take the Next Step?
Every family’s situation is unique. If you're unsure which estate planning tools make the most sense for your goals, we invite you to schedule an initial consultation. We’ll walk you through your options and help design a plan tailored to your needs.
Contact us today to get started with your personalized estate plan.