Deciding what to do to provide for your family after you’re gone is an immensely important decision. Everybody wants to ensure their family’s safety and well-being, and save up their whole lives to do so. One of the most popular ways to keep your family covered post-mortem is a will. The alternative for a lot of people, in retirement and in death, is a trust. There are benefits and drawbacks to both, and sometimes it is just good to know that there is a difference. So, what is the difference between a will and a trust?
What Assets Are Covered
With a will, the idea is simple: Whatever assets you own, outside of any trusts or joint tenancies, are covered by the will. you can allocate them however you like, and split them up among different people. You can also include things like naming a guardian for your children, which is pretty unique to a will. Children are obviously not assets, but it is good to note that this can be done through a will. In addition, you are able to give your last wishes, and requests for funeral arrangements in your will.
With a trust, only what you include in the trust is covered. Namely, a trust is usually only regarding material and liquid assets, not guardianship or last wishes. This is a good way to shield liquid assets from certain taxes, and make sure that you have the ability to control when it is accessible. Assets in a trust are protected from court proceedings as well; the trust is a legal document declaring that another person is now holding those assets.
Wills have to go through something called probate, or the proving of a will. This is a legal process in which the subjects of a will meet with lawyers to confirm that the will is really what the owner of the assets intended. This ensures that nobody defrauds wealthy families’ assets. It is a very vital step, as wills are activated when you die, and you aren’t there to oversee their implementation.
Trusts don’t go through probate, because they are initiated at the time they are created. Since you would be transferring assets while you are still alive, probate is a redundant and unnecessary process. Therein lies a major difference between these two strategies: when they take place. A trust will be activated right away, so if the assets in question are ones you will need access to while you are alive, it may not be the best move.
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