Estate planning is a very broad (and often confusing) topic.
There are countless estate planning options available, and the “best” estate planning option for you may depend on hundreds of different factors.
At bottom, though, estate planning can be boiled down to a simple definition:
An estate plan ensures that the right people are able to care for your SELF in the event you become incapacitated and that the right people are able to get your STUFF after your death.
The second part of that equation — what happens to your stuff, i.e., your assets — is what most people have in mind when they think about estate planning.
And when it comes to deciding what happens to your stuff, there are two main options:
While there are other estate planning options that can control what happens to your assets after your death, I will save those topics for another day.
For now, let’s focus on the main differences between Wills vs. Trusts.
Why Do You Need an Estate Plan?
If you died today, what would you want to happen to your assets?
Maybe you want your spouse to get everything. Maybe you don't want a certain relative to get anything. Or maybe you want to ensure your estate is used to pay for your child’s education.
Whatever their preferences, most people care about what happens to their stuff after their death.
Yet only 42% of U.S. adults have a Will or a Trust.
Part of that is likely due to the fact Wills and Trusts can be very complex, and attorneys usually don’t do a good job of explaining these two documents — or estate planning in general.
Related post: Estate Planning Basics You Need to Know
My goal with this post is to change that.
By the end of this article, you will be able to dazzle your friends and family by answering these questions and by making an intelligent, informed decision regarding your estate plan.
Well, "dazzle" might be a bit strong. But you will at least be able to impress them with your supreme estate planning knowledge. So let's dive in.
How Are a Will and a Trust Similar?
Before explaining how Wills and Trusts are different, it is important to understand how they are similar.
After all, they both try to achieve the same estate planning objective: they both control what happens to your stuff (your assets) after your death.
1. Wills and Trusts are both revocable documents.
To be more accurate, most Trusts are revocable.
“Revocable” is just a fancy way of saying that you can change or amend (or cancel entirely) the terms of the document during your lifetime — but only as long as you are competent.
Related post: Do I Need to Amend My Will or Trust?
If, for example, you develop severe dementia later in life, you may not have the legal capacity necessary to sign an estate planning document.
Having a revocable document is important because things can change over time.
You might want to change your beneficiaries, your representatives, or you might want to revoke your document entirely and start over.
Both Will and Trusts allow you to do that.
2. You can put someone in control of your estate.
You don’t want just anyone to be in charge of your estate, do you?
Of course not.
That is one of the major benefits of having an estate plan: you get to choose someone you trust to ensure that your affairs are properly settled.
In a Will, you can appoint an executor (also called a “personal representative” or “administrator”) who will be in charge of your estate and who manages the probate process.
In a Trust, you name a trustee who similarly manages your assets and distributes your estate.
3. You can name a Guardian for your children.
What will happen to your minor children if you pass away unexpectedly?
You can ensure that your children are cared for by someone you trust by using a Will or a Trust to nominate a guardian for minor children.
A guardian is someone with the legal authority to manage a minor’s care until they are 18.
Although the person you nominate as guardian will still need to be officially appointed by a court, your nomination will allow them to be appointed as long as they are willing and able.
Related post: What Is a Nomination of Guardian?
There are other similarities between a Will and a Trust, but these are the main characteristics that make them alike. What most people are interested in, however, is what makes these documents different.
How is a Will Different From a Trust?
While there are some similarities between these documents, it is crucial to understand their differences.
1. Last Will and Testament is still subject to probate.
There is a widespread misconception that having a Will means that your family will not need to go through probate in order to receive their inheritance.
Unfortunately, that is not the case. A Will must be probated after your death to be effective.
In other words: If you want to avoid probate, a Will is probably not the way to go.
On the other hand, a fully funded Trust can eliminate the need to probate your estate.
Related post: What is “Funding” My Trust and How Do I Do It?
Because a Trust does not cease to exist when you die, any assets that are titled in the name of your Trust at the time of your death can pass to your beneficiaries without the need for court approval.
Probate can be expensive, time-consuming, difficult to navigate, and stressful and contentious.
And considering it is not rare for attorneys’ fees, court costs, and other expenses to total $10,000+ in a probate, avoiding the process entirely can save a lot of money.
2. A trust can distribute your estate faster than a Will.
Having a Will (which must go through probate) generally means that your estate won’t be distributed for at least 6-12 months after your death.
I regularly see probates that take upwards of 2 years to complete.
This means that your family might have to wait over a year before you can use the assets that your left to them. If you are the sole breadwinner in your family, that can make things very difficult on your surviving spouse and/or children for a while.
A Trust, however, can often distribute your estate within 30-60 days. No muss, no fuss.
Related post: 8 Reasons You Should Have a Living Trust
Since the terms of the Trust are not subject to court approval, the trustee can settle the decedent’s estate as quickly as time allows.
3. A Will takes effect after your death; a Trust takes effect right now.
Let’s suppose you fall into a coma and become incapacitated.
Because a Trust is effective immediately upon signing, it can provide for the care of your assets and the care of your minor children during your lifetime.
And if you also have an Advance Directive for Health Care (also known as a Living Will), a Trust could avoid the need for someone to obtain a guardianship over you.
Related post: What’s the Difference Between a Will and a Living Will?
But because a Will is only effective after you die, it doesn’t help you if you are incapacitated.
4. A Trust gives you more control over distributions.
Suppose you have minor children (or other minor beneficiaries). If you were to die tomorrow, would you want your kids to receive all of their inheritance at 18?
Most people would prefer to divvy up distributions over time.
However, if you only have a Will, then whenever the judge bangs his gavel your estate will be distributed immediately and your children can get their inheritance as long as they are 18.
But if you use a Trust, you can provide instructions to your trustee that say a beneficiary should receive 1/3 of his or her inheritance at age 25, 1/3 at age 30, and the rest at age 35.
You don’t have that option with a Will.
Or what if some of your beneficiaries financially irresponsible?
If you are concerned that a beneficiary might squander his inheritance, you can use a Trust distribute a set amount of money per year to help make it last longer.
A Will would distribute everything in a lump sum.
5. A Trust is a private document.
Probate cases are a matter of public record.
That means anyone can access documents and information filed in a probate case, including your Will and information about your assets and debts, business dealings, family relationships.
In probate, your life is laid bare.
Any nosy neighbor or estranged relative can read your Will (even if you left them nothing) and even know if you faced any legal issues at the time of your death.
A Trust avoids all of that.
Because no one will need to file your Trust with the court, your personal and financial information can be kept private.
Wills vs. Trusts: Which is Better?
Clients often ask me whether a Will is better than a Trust, or vice versa.
After all, people spend a lot of money on their estate plan. It makes sense that they want to know which document works best.
Unfortunately, there is not an easy answer to that question. As I have said before:
Estate planning is not a one-size-fits-all proposition.
Sometimes, a Will might make more sense than a Trust. Other times, a client can benefit more from having a Trust than from having a Will.
A Trust is generally more flexible, durable, and cost-effective (in the long term) than a Will. But it is usually also more expensive in the short term.
However, cost should not be the sole factor on which you base your decision.
My job as an estate planning attorney is to help you consider all the relevant factors when deciding what estate planning option works best for you: your family, your estate planning goals, your assets, and any potential unintended consequences that could occur.
Choosing an estate plan is a major life decision. Take time to think about what works best for you.
Talk to an attorney about your estate plan.
Although Wills and Trusts serve the same purpose, they achieve that purpose in very different ways. Because there is no “one size fits all” solution to estate planning, you should consult with a qualified, experienced estate planning attorney before creating your estate plan.
To learn what estate planning options might work best for you, or to discuss updating your existing estate plan, contact the experienced Oklahoma City estate planning attorneys at Postic & Bates today for a free, no-obligation consultation appointment.
David M. Postic is an attorney at Postic & Bates, P.C. His practice focuses on estate planning, probate, real estate, trust administration, business planning, and adoption.
You can email David through our Contact Us page or by calling our office at (405) 691-5080.
[As with all our blog posts and other publications and resources, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]
