Will or Trust? Which Will Stand the Test of Time

Deciding whether to create a will or a trust depends on your goals, assets, and family situation. Each has its advantages, and understanding their differences can help you determine which option is better suited to your needs. Here’s a comparison of wills and trusts and some guidance on how to choose.

Wills: The Basics

A will is a legal document that outlines your wishes for distributing your assets after you pass away. It also allows you to name guardians for minor children and specify your final arrangements.

Advantages of a Will:

Simple and Cost-Effective: Wills are generally straightforward to create and are often less costly than trusts.

Legal Protection for Your Wishes: A properly executed will ensures that your wishes are legally recognized and provides clear instructions on distributing your estate.

Naming Guardians for Minors: A will allows you to designate guardians for any minor children, ensuring they’re cared for by individuals you trust.

Limitations of a Will:

Probate Process: Wills go through probate, a court-supervised process that distributes assets. Probate can be time-consuming and, in some cases, costly for beneficiaries.

Public Record: Because probate is a public process, the contents of your will and the value of your estate may become public record.

Limited Control Over Certain Assets: Wills cover assets solely in your name, meaning jointly held property, life insurance policies, and certain retirement accounts pass directly to beneficiaries outside the will.

Trusts: The Basics

A trust is a legal entity that holds your assets for beneficiaries and distributes them according to your instructions. Trusts can be created during your lifetime (living trusts) or take effect after your death (testamentary trusts).

Advantages of a Trust:

Avoids Probate: Trusts do not go through probate, allowing assets to pass to beneficiaries more quickly and privately.

Greater Control Over Distribution: With a trust, you can establish specific terms for how and when your assets are distributed, such as setting age requirements for beneficiaries or designating funds for specific purposes.

Privacy and Confidentiality: Because trusts avoid probate, their contents and terms remain private.

Continuity of Asset Management: If you become incapacitated, a trust allows a successor trustee to manage your assets on your behalf, helping avoid the need for a court-appointed guardian.

Limitations of a Trust:

Higher Upfront Costs and Complexity: Trusts tend to be more complex and costly to set up than wills, and they often require legal assistance.

Ongoing Management: To ensure the trust functions as intended, you must retitle assets in the name of the trust, which requires additional steps and administrative upkeep.

Which is Better for You?

Your personal circumstances will ultimately determine whether a will or a trust is the better choice. Here are some factors to consider:

Simplicity vs. Control: If you prefer a straightforward plan and don’t mind going through probate, a will may be sufficient. If you want more control over how and when assets are distributed, a trust may be preferable.

Privacy Concerns: If you wish to keep your estate private, a trust can ensure confidentiality by bypassing probate.

Size of Estate and Asset Complexity: Trusts are often ideal for individuals with larger or more complex estates or those with minor beneficiaries who may need guidance on asset management.

Minors and Special Needs Dependents: Trusts allow you to manage assets for children or dependents who require financial oversight, making them a good option for families with special circumstances.

Tax Planning and Asset Protection: Trusts offer more sophisticated options for tax planning and protecting assets from creditors, making them valuable for larger estates.

Combining a Will and a Trust

Many people find that combining a will with a trust provides the most comprehensive protection. For example, a “pour-over will” can transfer any assets not initially placed in the trust into the trust upon your death, ensuring all your assets are handled according to your trust’s terms.

Consult with an Attorney

Choosing between a will and a trust can have significant financial and personal implications, so consulting with an experienced attorney is often wise. At SMITH | ASHCRAFT, we can help you assess your unique situation, explain your options, and create a plan that meets your goals and protects your loved ones.