Wills and trusts are two different types of estate planning documents. And according to Legal Zoom, only about 33% of American adults have one or both of these types of estate plans.
Despite their similarities, there is a major difference between a trust and a will. This difference is critical to understand if you are getting ready to start the estate planning process.
Are you wondering how to decide between a will vs trust? We created this guide to help you understand the difference between the two. Keep reading for everything you need to know.
What Are Wills?
Writing a will is a step many people make before they pass. However, anyone can create a will as long as he or she is 18 years of age or older. A will assigns the executor’s assets to be divvied up amongst his or her beneficiaries.
Different states create various regulations around wills. For example, in Michigan, the will has to be written down (physically or digitally). It must also have the signature of at least two witnesses.
What Are Trusts?
A trust is an asset or group of assets. A trustee oversees it and, when the time comes, divvies up the assets in the trust to its beneficiaries. The person who owns the assets (the settlor) assigns the trustee and beneficiaries.
The settlor does not have to die for his or her beneficiaries to receive their assets. Instead, the settlor can decide to distribute the trust at any time he or she wants, including after death.
The Difference Between a Trust and a Will: Explained
The main difference between a will and a trust is when the documents take effect. Wills only take effect upon the executor’s passing. Trusts take effect at the settlor’s discretion, whether during their lifetime or after their death.
Another key difference is privacy. Wills offer less privacy because the public can access them after the executor’s death. Trusts, on the other hand, never become public documents.
If you have children, you may want to consider getting a will instead of or in addition to a trust. You can not name guardians in trusts. With a will, however, you can appoint a guardian for your kids if you pass.
Last but not least, you can only ever have one legally-enforceable will. You can create as many types of trusts as you want (unless it’s an irrevocable trust). And you can use your trust as a replacement for or supplement to your will.
It can be tricky to know whether you need a will or a trust, even when you understand the differences between them. Consider hiring an estate planning lawyer to help you decide which document is right for your financial situation.
Looking for More Estate Planning Advice?
So, what is the difference between a trust and a will? Trusts assign assets to individuals during your lifetime or after your death. Meanwhile, wills only allow your benefactors to get your assets after you pass away.
Are you looking for more legal advice? Keep scrolling for more articles like this one!