Posted in Triplett & Carothers on August 1, 2024

Both wills and trusts dictate who will receive your assets after you die, but they do it in different ways. Each way has its advantages and disadvantages.

Wills (sometimes called your last will and testament) tend to be simple documents that describe how to distribute property to your beneficiaries after your death.

Wills allow you to name guardians for your children and pets, designate where your assets go, and specify final arrangements for your body and household items.

The simplicity comes with drawbacks. Wills offer somewhat limited control over the distribution of assets. Additionally, most wills go through a sometimes costly legal process. Once your will is probated, it becomes a public document that anyone can view for a fee.

A trust is more complicated to set up than a will, but it also distributes your assets to your beneficiaries. The difference is that the assets may be distributed at any time you determine, not just after your death. A trust is effective as soon as you sign and fund it. (If the trust is funded during your lifetime, it’s often called a living trust.) Trusts minimize or avoid probate. A living trust may be managed by you during your lifetime; after you die, it will be managed by a trustee whom you have previously appointed.

A trust also provides these benefits:

• There is greater control over when and how your assets are distributed.
• The guidelines you set apply to any assets you hold inside the trust.
• There are a variety of trust forms and types.

“Funding a trust” means transferring assets to it. In this way, the trust controls the assets that you used to own.

Will or trust?

It is important to assess your situation, including your goals and needs, to find the solution that best suits and protects your family. For most people, a will is the easiest and most affordable way to plan. However, it is important to consider these factors: the anticipated size of your estate, whether you’ll need to access assets in your estate before you die, the complexity of your distribution wishes — that is, how many beneficiaries you have and the types of assets you’re dividing among them — and your estate-planning budget.

Most people who set up trusts also have wills because they do different things. A will allows you to name guardians for your children, appoint an executor for your estate and declare your final wishes. A living trust provides for the management and distribution of your assets during your lifetime and after your death.

It is also possible to connect your will and trust by setting up a revocable trust in your lifetime and funding it at your death through a pour-over will. When you die, anything you own outside your trust — as well as anything subject to the terms of your will — will be paid to your trust. Pour-over wills essentially act as a plan to ensure all your assets go to your trust.

Living wills

A living will is different from your so-called last will and testament. A living will provides guidance for medical decisions and end-of-life care, should you be unable to communicate those wishes yourself. The documents in a living will often include a medical power of attorney, an advance health care directive and a HIPAA authorization form. Your family and your medical professionals will look to your living will for guidance on matters such as life-sustaining treatment, pain management and organ donation.

Laying out clear instructions for your legacy is one of the kindest things you can do for your loved ones. Trusts and wills are two avenues to use to outline your end-of-life wishes. By planning ahead, you can be confident you’re protecting your loved ones and cementing your legacy.