We all know about “Wills” and “Trusts”, right? Well, at least we’ve all heard of a “Will” and a “Trust.” Do you really know what they are or what they do? Do you know how they differ, or the advantages of one versus the advantages of the other? Both are very useful, but serve different purposes. Sometimes just one is used in an estate plan, and sometimes both are used. The key is to know the purpose of each document and use them to fulfill your goals.
Wills and Trusts differ in countless ways. One primary difference is when they take effect. A Will, for example, only takes effect upon death. Prior to death, a Will is nothing more than a list of directions waiting to take control. Upon death, however, a Will directs who will receive your property and appoints a person to carry out your wishes. Trusts, on the other hand, take effect immediately upon execution. A Trust doesn’t have to wait until death to be effective. In fact, a Trust can manage and distribute profit at any time, before or after death.
Another primary difference between a Will and a Trust is any property owned by a Trust avoids probate. A Will, on the other hand, does not avoid probate. That means when a Will is used, a court will oversee the administration of the Will and ensure the property goes to the proper beneficiary. The probate process typically lasts 9 to 18 months, and can cost thousands of dollars. Because property owned by a Trust avoids probate, that property is transferred to beneficiaries cheaper and more efficiently.
Sometimes it’s best to use a Will and a Trust together. For example, a Will allows you to appoint guardians for minor children. A Trust can help plan for disability or estate taxes. Because of these reasons, and countless others, the best option may include the use of a Will and a Trust. Under this scenario, we can use the benefits of each document to our advantage, while minimizing the effect of each document’s disadvantages.
As you can see, there is no textbook answer to the age old question, “Should I have a Will or a Trust?” The answer to that question is based entirely upon each person’s facts and circumstances. We at Epiphany Law know not every situation calls for a Will, and not every situation calls for a Trust; we are an excellent resource to consult when preparing an estate plan. Our goal, after all, is to create an estate plan specifically tailored to each client, and to help execute the plan.
Epiphany Law Estate Planning Team