Spoiler alert: Trusts and wills are both estate planning tools that say what should happen to your assets. A will is the more basic of the two. It goes into effect when you die and lays out asset distribution, final arrangements, and guardians for kids and pets. A trust, on the other hand, holds certain property and gives you significant control over asset distribution. Trusts become effective as soon as you create them.
The differences between wills and trusts
Let’s start with wills. A last will and testament (a.k.a. will) is easier to set up because it is limited in what can go into it compared to a trust. With a will, you can put your asset distribution upon death, final arrangements, and guardianship provisions. Keyword: it goes into effect when you pass away. You can’t include clauses that affect you during your lifetime, such as during incapacitation or disability. Wills also do NOT avoid probate. Because wills are generally more limited and easier to get, they’re cheaper.
On the other hand, trusts are much more complex (and more expensive) because there’s more you can put into one, and they bypass the probate process. With a trust, you can control who, how, and when assets are distributed to your beneficiaries. For example, you can say, “Beneficiary A will only receive Asset X upon turning the age of 30.” Trusts also avoid probate and provide more protection against taxes. In contrast to a will, trusts can go into effect immediately (whereas wills go into effect once you die). That means trusts can talk about what happens if you become incapacitated or disabled.
Pros and cons of a will
Let’s do a quick run-through of the advantages and disadvantages of a will.
Pros:
- Wills are generally easier to obtain
- Wills are cheaper to get than trusts
- Wills require less ongoing maintenance and oversight than a trust
Cons:
- Wills are limited in what they can cover compared to a trust
- Wills go into effect once you die, so you cannot cover things during your lifetime
- Wills do not avoid probate
Pros and cons of trusts
Now that you understand the pros/cons of a will, let’s talk about trusts.
Pros:
- Trusts are more comprehensive and can give you more control over asset distribution
- Trusts go into effect as soon as you create one, so you can cover matters that happen during your lifetime, such as incapacity
- Trusts can help prevent taxes and probate
Cons:
- Generally, trusts are more expensive than wills
- Trusts require continued maintenance and oversight
- Trusts are more complex and difficult to set up
What’s better: A will or a trust?
Why not both? Yes, you can do both, and you should consider doing both a will and a trust. Here are some questions to consider when determining what’s better for you (a will or a trust) or whether you should do both:
- Do you want your beneficiaries to receive your assets under certain conditions?
- Do you have complex assets?
- Do you want to name guardians for your children or pets?
- Do you want to decide how your assets should be taken care of if you become incapacitated?
If you answered yes to all of the above, you should probably get both a will and a trust. For example, if you have a complex estate and beneficiaries with different needs, a trust allows you to incorporate how and when assets should be released, avoid probate court, and minimize taxes. A will allows you to determine guardianship and can also ensure any assets that are not in your trust go into your trust (this is called a pour-over will).
Why having both a will and a trust is smart
You can have both a will AND a trust! Like we said before, they work great together to make sure everything happens just like you want it to. For example, your will can name who cares for your kids, while a trust can give directions on how their money should be used. Plus, with a pour-over will, anything you forgot to put in your trust goes there automatically through your will. Having a trust helps avoid probate court, but a will by itself doesn’t. So, using both is the best way to cover all your bases!
The bottom line on the differences between trusts and wills
Trusts and wills are both tools to help you distribute your assets. Trusts can handle things during your lifetime, whereas wills only handle things upon your death. Trusts can avoid probate, wills do not. Trusts are more complex and, thus, generally more expensive than wills to obtain. Trusts also require ongoing maintenance, whereas wills generally don’t. And when you use wills and trusts together, you can create the optimal estate plan for your needs!
Nicole Sheehey is the Head of Legal Content at HelloPrenup, and an Illinois licensed attorney. She has a wealth of knowledge and experience when it comes to prenuptial agreements. Nicole has Juris Doctor from John Marshall Law School. She has a deep understanding of the legal and financial implications of prenuptial agreements, and enjoys writing and collaborating with other attorneys on the nuances of the law. Nicole is passionate about helping couples locate the information they need when it comes to prenuptial agreements. You can reach Nicole here: Nicole@Helloprenup.com
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