Trust vs. Will

When it's time to sit down and plan our estate, it's essential to know what different terms mean, such as trust vs. will, and how choosing between them can affect our final wishes. The terms trust vs. will are often confused, but considerable differences exist between these two estate transfer tools. Both wills vs. trusts are estate planning mechanisms that enable you to bequeath your assets to beneficiaries of your choice, and both methods enable your loved ones to handle your affairs with relative ease. But, when you look closely at trust vs. will, there are clear benefits and disadvantages to each that can help you decide which is right for you.

For example, a will is easier to create, while a trust may be time-consuming, expensive and needs to be managed going forward. A will has to face probate court, while a trust does not. A will can also be contested, but a trust rarely is. A will becomes active upon death, while a trust comes into effect as soon as the setup is complete. The differences between trust vs. will as methods of estate transfer are many, so we've put together an in-depth comparison of the two in hopes of making your estate planning decisions a little bit easier.

In this article, we will do a deep dive into the differences between living trusts vs wills. We'll talk about the cost and timeframe of creating a last will vs. living trust, what the different types of wills and trusts are and how you can make them work for you and your loved ones. If you're looking for some assistance in deciding between a living trust fund vs. will, stick around and let's get into it.

Wills and trusts seem pretty similar, but the differences between a trust fund vs. will are significant. These distinctions can help you to choose between the two. Using a trust vs. will doesn’t need to be a one or the other situation either. It is also possible to use both a trust and will in tandem to serve different needs.

A will is a written legal document that outlines your wishes. The fundamental purpose of this document comes into effect upon your death as it serves to be your voice in your absence. When used to express your preferences in handling your estate, your last will and testament can include what to do with assets, appointing guardians for minor-aged children, awarding legacy gifts to charities and more. A will can be contested and must go through probate court. When you use a will to distribute your assets after death, it becomes public record, accessible by anyone who desires the information.

On the other hand, a trust begins to serve its purpose as soon as the trust is set up, which means it comes into effect while you are still living. It is an agreement between you and the trustee, who is a party to whom the legal responsibility of your trust is given, in order to distribute your assets to your beneficiaries. Before any dispersal, the trustee will hold the title to the assets with that purpose in mind. Trusts are very rarely contested and do not have to go through probate court. However, between the two — trust vs. will — a trust is more complicated to set up than a will.

Many different types of trusts and wills exist and can serve niche purposes.

In short, a will is a legal document that outlines how you would like your estate to be dealt with upon your death. Of course, there is so much more to a will than that. Let's take a closer look at some of the details and specifics of wills.

A will can be created at home using tools found on the internet or kits purchased in a store. The entire process can take mere hours and cost just a few dollars, or can even be free. All you need is an internet connection, a printer and some paper. Choosing to do it yourself can work out fine for most Americans and will save you some cost. However, most legal and financial advisors will recommend seeking the assistance of a professional. An attorney will make sure all the loose ends are tied up; everything is done to the letter of the law, identify any potential problems and help you solve them. If your estate is at all complicated, filing your will with an attorney is the best choice.

When you create your will, you're going to list your assets, including everything you own. You'll want to list your physical property such as land, vehicles, homes, safety deposit box contents, cash and accounts. As well, list anything intangible in your name such as stocks, bonds, intellectual property and other assets. You'll also want to identify any debts you may leave behind. You may also use your will to appoint a legal guardian for your minor-aged children and caregivers for your pets.

There are several different types of wills. A simple will is easily accomplished on your own with online tools or a brief meeting with your lawyer. A testamentary trust will is used in conjunction with a trust. A joint will is a will for more than one person, and spouses often use joint wills. Finally, a living will allow you to lay out your preferences for medical situations where you may become unable to communicate your wishes.

A trust is a fiduciary agreement between you (the grantor) and your trustee to oversee any assets intended for your beneficiaries. Your trustee is someone you legally appoint to hold title over the assets in the trust until they are dispersed to your heirs.

Trusts come in many different forms, but living trusts and testamentary trusts are the two main types. If you'll recall, we already talked about testamentary trusts as a form of will because this type of trust is created in a last will and testament.

Living trusts can be revocable or irrevocable. A revocable living trust is a trust created while the trustor is still alive, which can be revised as long as the trustor is able. Conversely, you cannot change an irrevocable trust once the trustor creates it.

Trusts are often used to avoid probate court costs and keep the details out of the public record. Trusts do not require probate to come into effect, which means no public court filings are detailing the specifics of the trust. If a trust is created to avoid probate, it is often a revocable living trust so that the trustor maintains ownership and title over the property in the trust and can change the specifics of the trust when needed—a huge advantage when it comes to living revocable trust vs. a will.

Testamentary trusts aren't created until the trustor has passed away and are formed as instructed in the grantor's last will and testament. Such trusts are often made when the distribution of the assets in question is dependent on certain conditions. For instance, testamentary trusts are used when a parent wants to leave their assets to their minor children who are not old enough to manage the assets themselves yet. So, the trust exists to disperse the property and funds held within when the beneficiaries become legal adults.

Let's take a look at differences between a last will and testament vs. a living trust in estate planning:

As you can see, there are more differences between an irrevocable trust vs. will than there are between a revocable trust vs. will. The pros and cons of an estate trust vs. will vary depending on your situation and the type of trust you choose. No matter your assets and property situation, there should be an estate dispersal option that suits your unique needs.

There is no doubt between a trust vs. will that creating a will is a far easier process than creating a trust. A will can be as simple as writing your wishes down on a piece of paper and having it notarized. There are multiple tools on the internet available to anyone who wants to create a will. Often, you will pay a small fee to download documents that make the process easy and painless. Even if you decide to seek the advice of a legal professional in the creation of your will, it is still going to be a relatively quick process, and the cost will be minimal.

Creating a trust, on the other hand, is far more complicated. You'll need to begin by deciding what kind of trust you want to set up and how you're going to do it. While it is possible to set up a trust on your own using tools online, it is advisable to use the services of an estate planning attorney. If you're opting to create an irrevocable trust, you will require the services of a legal professional.

To set up a trust, you'll have to create a trust document and have it notarized. Your trust document will have all of the details of the trust agreement laid out, and it will establish who the grantor is, what assets to include in the trust, who your beneficiaries will be, who the trustee is, and it will name a successor to the trustee should anything get in the way of them fulfilling their duties.

After your trust agreement is notarized, you'll need to set up a trust bank account and fund it with the assets laid out in the trust document. You will then need to transfer any other assets into the trust, which requires you to change the ownership of any property intended for your beneficiaries from yourself to the trust.

The cost of setting up a trust commonly exceeds that of creating a last will and testament. Trusts can begin at around $1,000 to set up, and that cost will increase with the complexity of the trust.

Now that we know the differences between wills vs. trusts, pros, cons and other considerations become apparent. There is no definitive answer when deciding if a trust vs. will is better. It will depend on your unique circumstances and the complexity of the asset dispersal you are trying to achieve. When you compare a revocable living trust vs. will, there are advantages and downfalls, and significantly different goals are achieved between a living will vs. living trust.

Most of us will need a will because it covers more than just assets. A will helps us ensure the wellbeing of our children and pets, for instance. Only some of us may need a trust, and those who do often choose to use both a trust and will when planning their estate. Your will can outline personal wishes to do with assets guardianship for children and pets, and it can even outline your preferences for end-of-life care and funeral. A trust can fill in where a will can't, ensuring some of the assets you wish to transfer to beneficiaries are not subject to estate tax while keeping the details out of probate court and the public record. While it is much cheaper and easier to create a will, a trust can create added value to the outcome.

Ultimately, your choice between trust vs. will, or both, will be determined by the details of your estate and what you want to achieve with it. There is a best route for you, and it might be in your best interest to seek the advice of a professional, or get started with planning ahead by using a retirement planning app like Everdays. With your free, digital account, Everdays can help you get started with the choices that matter most to you about your end of life planning and final wishes, and we make it easy to give loved ones instant access to your plans so they know what to do when the time comes.