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What is the Difference Between Wills and Trusts?

Two women speaking at table over paperwork

No one likes to think about what will happen after they’re gone, and so “wills,” “trusts” and “estates” are not usually popular conversation topics. If you’re still far from retirement, you may think there’s no reason to even start writing a will or trust.

Nevertheless, it is important for all adults to plan ahead for the unexpected, as unpleasant as it may be.

If you’re ready to start planning, you may be wondering whether you need a will, trust or both, and what the difference is between the two.

In short, nearly everyone should have a will, but not everyone likely needs a living or irrevocable trust.

A will is a written document sharing the wishes of a deceased person, and becomes active after their death. A will does not just cover assets – if you have children who are minors, you will want to have a will to state your wishes for their guardianship, including where you want them to be raised.

A trust is a fiduciary relationship in which a trustor gives a trustee the right to hold title to assets or property for a third party (your beneficiaries). It does not name guardianship of children.

Unlike a will, a trust is active the day you create it, and a grantor may list the distribution of assets before death. Trusts can be revocable (allowing changes), or irrevocable, meaning they cannot be altered after their creation. A living trust (a trust created while the trustee is still alive) can be changed by its grantor. A trust offers more control of assets than a will, but is generally more expensive and more complicated to set up and maintain.

While wills must go through probate court, a living trust can pass property, outside of court, immediately upon the trustee’s death. Probate is a legal process where an authorized court administrator examines the will, and this can be contentious if family members contest the will.

Additionally, wills are public record while trusts are not.

What Is the Process to Set Up a Will or Trust?

Whether you choose to create a will or trust or both, it is never a bad idea to seek out professional advice from financial and legal advisors. They will help you make a list of your assets and determine what plan is best for you. The cost of setting up a will or trust will range depending on the complexity of the document and whether you opt to create one yourself online, or with an estate planning attorney.

What Happens If I Don’t Have a Will?

If you pass without creating a will or trust, the state of your residency will have to get involved to oversee the distribution of your assets, which can be costly. If you have children under the age of 18-years-old, the court will be responsible for appointing a legal guardian.

No matter how simple you may think your finances are, or how difficult it is to have these conversations, it will make things easier for your beneficiaries if you plan ahead.

Want to chat? Contact a Service Financial Group representative today.