When planning for the future, you often hear about two important legal tools: wills and trusts. While both help distribute assets after your death, they serve different purposes and function in unique ways. If you’re confused about which option is right for you, understanding the differences between wills and trusts is crucial.

What is a Will?

A will is a legal document that outlines how you want your assets to be distributed after your death. In addition to specifying beneficiaries, a will can also designate guardians for minor children and detail your wishes regarding your funeral arrangements.

Here are key features of a will:

  • Probate: A will goes through probate, which is a legal process where a court validates the document and ensures that your debts are paid before distributing assets to beneficiaries. This can be time-consuming and public.
  • Control: A will takes effect only after your death. It doesn’t provide a mechanism for managing your assets if you become incapacitated during your lifetime.
  • Simple Setup: Wills are generally easier and less expensive to set up compared to trusts, making them a straightforward choice for many individuals.

What is a Trust?

A trust is a legal arrangement where one person (the trustee) holds and manages assets for the benefit of another (the beneficiary). Unlike a will, a trust can take effect during your lifetime, and it can be structured to handle the management of assets both while you are alive and after you pass away.

Important aspects of a trust include:

  • Avoiding Probate: Trusts bypass the probate process entirely, allowing for a faster and more private distribution of assets.
  • Incapacity Planning: Trusts are particularly useful if you become incapacitated, as a trustee can step in to manage your affairs without the need for a court-appointed guardian.
  • Cost and Complexity: Setting up a trust can be more complex and expensive than a will. Trusts require ongoing management, especially if they are established while you’re alive.

Major Differences Between Wills and Trusts

  1. When They Take Effect:
    • Wills only take effect after death.
    • Trusts can take effect while you are alive and continue after death.
  1. Probate:
    • Wills must go through probate, which can delay distribution and make details of your estate public.
    • Trusts avoid probate, allowing for private and expedited distribution.
  1. Control Over Assets:
    • A will does not offer protection if you become incapacitated.
    • A trust can manage your assets during your lifetime if you’re unable to do so.
  1. Cost:
    • Wills are generally less expensive to create.
    • Trusts can be more costly and complex but offer additional benefits like avoiding probate and protecting against incapacity.

Do You Need Both a Will and a Trust?

Many estate plans include both a will and a trust to cover different aspects of asset distribution and management. For example, a “pour-over will” ensures that any assets not included in your trust will be transferred into the trust upon your death. This way, you can ensure that all your assets are distributed according to your wishes, whether they were initially included in the trust or not.

Choosing the Right Tool for You

Whether you need a will, a trust, or both depends on your personal circumstances, the complexity of your assets, and your goals for asset management and distribution. For straightforward estates, a will might be sufficient. However, if you’re looking for privacy, flexibility, or protection in the event of incapacity, a trust might be the better choice.

At Forbes Law Firm, we specialize in helping clients navigate the complexities of estate planning. If you have questions about wills, trusts, or other estate planning tools, contact us for a consultation tailored to your unique needs. Serving Davidson, Cornelius, Huntersville, Mooresville and the larger Lake Norman and North Charlotte area, we are here for you.