The Difference Between Wills And Trusts

While nobody wants to imagine themselves dead, it is inevitable. So, every responsible adult should plan for it beforehand, especially if you have considerable wealth. Dying unprepared could mean leaving wrangles that could tear your family apart in the struggle to inherit your estate. 

There are several options for estate planning, but two of the best are wills and trusts. It is possible you have come across these two terms in your research on estate planning, but may not be sure how they compare or what may be best for you. 

But worry not, as this article will highlight the differences to help you identify what works best for you.

What Is a Will?

A will is a legal document with the testator's directions about the distribution of assets after you are gone. For a will to be legally binding, it has to be written and signed by the testator, which in this case is you. 

The testator must be over 18 and of sound mind. Another person could also write the will but at the testator's direction. There is also a requirement that it be written in the presence of two witnesses who are also signatories to the will. 

After the testator's death, the will is filed in a probate court in your jurisdiction, which oversees its execution. 

What Is a Trust?

On the other hand, a trust agreement is between you (trustor) and another party (trustee). As the trustor, you give the trustee the legal right to manage your estate on behalf of your beneficiaries. 

The trustee is limited in their management and handling of the estate by the terms of the trust document.

This option is preferred by people who hope to have their assets distributed according to their wishes while saving time and expenses.

Differences In Implementation Dates and Probate

There are key differences in the application and execution of a will and trust. The first is the implementation date. A will takes effect after the testator dies. However, a trust may be much more flexible. You can set your trust agreement to allow the trustee to take over the management of your estate in the event of mental incapacitation. 

Another significant difference is the probate process. Probate is the legal process of estate distribution after the death of the legal owner. If you die with a will or intestate (without a will), your estate distribution must go through the probate process. The problem with the probate process is that it can be stretched for months and is expensive. 

If you have a trust, your estate distribution process doesn't have to go through probate, making the process more seamless and less costly. This is why most people with considerable assets choose the trust option. 

Maintenance And Contestability

In terms of maintenance, trust is maintenance intensive and requires updating every time you add a new asset to your property. With a will, you may only need to update it every three to five months or when a significant life event happens, such as the death of a beneficiary or marriage. 

The two also differ in their contestability. If there are disagreements in estate distribution, a will can become highly contestable, for example, if it is outdated. 

On the other hand, trusts are created under stringent laws and updated with every change in the trustor's financial life, so it is always up-to-date, making them significantly tricky to challenge.