Wills and trusts are both useful estate planning tools. Each has advantages and disadvantages. Determining which is right for you depends on your goals and circumstances.
Let’s define each then we can compare the two side by side.
What Is a Will?
A will (also called Last Will and Testament) is a written legal document that is signed and witnessed. You, the testator, direct how you want your assets to be distributed after your death. In your will, you name an executor who will be responsible for finalizing your estate in accordance with your wishes and the law. A will allows you to name beneficiaries and make bequests (i.e. who gets your stuff), appoint guardians for minor children and choose someone to manage property left to minor children.
After your death, your will is filed with the court and this begins the probate process. The court will determine the validity of the will and appoint the executor. The executor is responsible for publishing a Notice to Creditors and providing an inventory of assets to the court. When all debts are paid, the executor will distribute remaining assets according to the terms of the will. This process can take anywhere from a few months to a year or more and can be very complex. Because of the important duties of the executor, most courts in Texas require that the executor is represented by an attorney.
What Is a Trust?
The definition for a trust is the legal relationship created when one person (the “grantor”) places assets under the control of another person (the “trustee”) for the benefit of some other person or people (the “beneficiaries”) or for a specified purpose.
In layman’s terms, a trust is created by the grantor (that’s you). The grantor writes the rules governing how the trust is to operate, what it is to do, and how and when to do it. If the trust is revocable, you can change the rules at any time. If the trust is irrevocable, you can’t. (Each form has advantages and disadvantages, including tax implications.)
When creating the trust, you appoint a trustee, who will have the job of managing the trust and its assets. (People often appoint themselves to serve as trustee.)
A trust does cost more to set up and requires management after it is created. For the trust to be effective, it must be funded, meaning assets must be placed into it. Assets in the trust are not subject to the probate process.
Here is a side by side comparison:
When considering estate planning and what is right for you, it best to seek the advice of an estate planning attorney. Through their guidance and expertise, you can set up a plan that will accomplish your goals.