Wills and trusts are both estate planning tools that ensure that your loved ones are cared for and that your assets and property are distributed according to your wishes. However, there are some significant differences between the two. By having a general understanding of the benefits and limitations of each, you will be better able to decide which strategies will help you achieve your estate planning goals. If you have questions or concerns about the estate planning process, including how to set up a will and/or a trust, it is highly recommended that you contact an experienced will and trust estate lawyer who can help you navigate the process and recommend the best legal course of action.
What Is a Will?
Also known as a last will and testament, a will is a legal document that outlines how you would like your assets to be distributed after you die. It also allows you to name guardians for minor children and designates who should be the executor of your estate upon your death. The executor will be responsible for handling your affairs, including funeral arrangements, guardianship of minor children, distribution of property and assets, and charitable donations. Ultimately, a will can be as detailed as you want, where you make specific plans for items ranging from sentimental keepsakes and jewelry to cars and real estate property. The will only becomes active upon your death and is subject to the probate process, which is a court-supervised legal process that involves distributing a deceased person’s assets and settling their debts.
What Is a Trust?
A trust is also an estate planning tool that allows you to transfer ownership of your assets to a trust account that can be used for various purposes. In order to set up a trust, you will need to create a trust account, deposit assets in the trust and authorize a trustee to distribute those assets to your beneficiaries. The two main categories of trusts include the following:
- Irrevocable living trust: This cannot be amended once it has been created, and the assets placed in the trust cannot be removed.
- Revocable trust: This type of trust can be amended at any time, and assets can be removed. In addition, revocable trusts can avoid the probate process. They are more commonly used in estate planning since they can be modified, and assets can be moved in and out of the trust over the course of one’s lifetime.
What Are the Main Differences Between a Will and a Trust?
A will and a trust are similar in that they are both legal documents that are used in estate planning. However, there are some significant differences between a trust and a will that you should be aware of as you navigate the estate planning process, including the following:
- Timing: This is one of the most significant differences between a will and a trust. A will goes into effect when you die, whereas a trust goes into effect as soon as it is created. You can distribute the assets from the trust at any time.
- Probate: The will must go through the probate process, where the court will ensure that the will is valid and oversee the administration of the will. Once authenticated, the will passes through probate and reaches your intended beneficiaries. If it is not authenticated, your assets may go to the state instead of your loved ones. It can take an average of 18 months to administer a will through probate. In addition, there are a number of fees required. A trust is not subject to the probate process. Since the courts do not need to be involved, a trust is generally less expensive and time-consuming.
- Privacy: A trust provides more privacy because the details of the trust are not included in the court records. This is not the case with a will. Because a will must go through probate, which is part of the public record, anyone can have access to your will, as well as your assets, and a list of your beneficiaries.
- Taxes: A will does not avoid estate taxes, which can range from 18-40 percent. A trust can reduce estate taxes and provide protection from creditors.
What Are the Pros and Cons of a Will and a Trust?
It is important to consider the benefits and disadvantages associated with both a will and a trust before proceeding with the estate planning process.
The following are examples of the pros and cons of a will:
Pros:
- You can create a will yourself.
- It is easy to make changes to a will.
- You can make a will for free.
- A will helps your loved ones settle your estate after you die.
Cons:
- You will have to go through the probate process.
- A will becomes a public record after you die.
- A will does not protect assets from creditors.
- You cannot avoid paying estate taxes.
The following are the pros and cons of a trust:
Pros:
- An irrevocable trust protects your assets from creditors.
- An irrevocable trust may minimize estate taxes.
- You do not have to go to probate court.
- Your assets will be managed if you are unable to manage them yourself.
Cons:
- A trust can be expensive to maintain.
- You will likely require legal assistance to set up a trust.
- If irrevocable, you will be unable to make any changes to the trust after it is created.
Blue Ash Wills and Trusts Estate Lawyers at Wolterman Law Office Assist Clients with All Aspects of Estate Planning
If you require legal assistance with estate planning, including setting up a will or a trust, it is highly recommended that you contact the Blue Ash wills and trusts estate lawyers at Wolterman Law Office at your earliest convenience. To schedule a free consultation, call us today at 513-488-1135 or contact us online. Our office is located in Loveland, Ohio, and we serve clients in Hamilton County, Fairfield, Norwood, and Forest Park.