What Is a Will vs. a Trust?

You may have heard the phrase, “You can’t take it with you.” It refers to the idea that you can’t take your money or material possessions with you when you die. It’s a good thing to remember, no matter which stage of life you’re in. Instead, it’s wise to have a plan in place to distribute your possessions according to your wishes when the time comes. Doing your research is the first step in the estate planning process. For instance, you may be familiar with common estate planning documents, but do you understand the difference between a will vs. a trust?

At Riverview Trust Company, we help people plan for their financial futures. Our mission is to foster genuine relationships so we’re able to deliver exceptional service based on your individual needs and goals. We’ll take you through the differences between a will vs. a trust so you can move forward with confidence and the peace of mind that your legacy is well protected for generations to come.

WILL VS. TRUST EXPLAINED

A will is a legal document that outlines how you would like your assets distributed following your death. You name an executor to pay any outstanding debts, handle taxes, and carry out your final wishes. (Note that we are not referring to a living will here. That document serves as a medical directive if you become unable to make your own healthcare decisions.)

By contrast, a trust can take effect during your lifetime. When you establish a trust, your assets are placed in the trust rather than held in your personal name. Similar to a will, you name the beneficiaries of your trust and designate a trustee to manage the trust and oversee the distribution of assets at the specified time.

There are two main types of trusts—revocable and irrevocable. With a revocable trust, you can name yourself as trustee and maintain full control of your assets. With an irrevocable trust, however, you give up control of your assets, and the trustee is responsible for distributing them according to the specific rules outlined in the trust document.

For example, you may want to set aside money or property for your children to inherit once they mature into adulthood. In this case, you could establish a trust that distributes assets to them once they reach a certain age. You also have the option of transferring funds in installments over a series of milestones or life events.

Both trusts and wills serve important roles in the estate planning process. A will ensures your wishes are honored after your death. You’re able to designate beneficiaries, transfer property, and appoint guardians for minor children. A trust, meanwhile, allows you to maintain control over your assets during your lifetime, determine when your heirs will receive their inheritance, and set guidelines for how the funds are distributed.

WILL VS. TRUST PROS

Pros of a Will

Simplicity

A will can be established relatively quickly. You can set up a will online or meet with an estate planning expert and have a will drawn up in a matter of a few short weeks.

Versatility

Wills do more than protect your material assets. They protect your loved ones as well. A will enables you to appoint a guardian to care for your minor children in the event you are unable to do so.

Affordability

Though costs vary, wills are generally a cost-efficient estate planning tool.

Pros of a Trust

Privacy

Trusts typically allow you to bypass the probate process and maintain privacy in your financial affairs.

Flexibility

Instead of waiting until after your death to distribute assets, you can transfer them into a trust during your lifetime. You also have the option of establishing parameters for when the assets will be distributed or how they may be used. This can be especially helpful if you’re worried your beneficiaries may have difficulty managing their money wisely.

Continuity

Trusts can remain in effect for decades or even centuries, depending on the laws in your state. You’re able to set up long-term rules for your assets so you can determine how they will be used, not only by your children, but also by future generations.

WILL VS. TRUST CONS

Cons of a Will

Potential Delays

Since wills usually go through the probate process, there may be significant delays in the administration of your assets, as probate court is responsible for validating the will and overseeing the administration of the estate. While the American Bar Association notes that probate is not as lengthy of a process as it used to be, it can still take, on average, six to nine months.

Less Privacy

Once a will goes through probate, it becomes part of the public record. Once public, anyone can request a copy of it and view the contents of the document.

Limited Control

Wills function as an estate planning tool following your death, rather than providing an ongoing management structure as a trust does. A standard will also does not provide a way to manage or transfer your assets should you become ill or incapacitated.

Cons of a Trust

Higher Costs

You may incur higher up-front costs to establish a trust than you would to create a will.

Complex Setup

Since they tend to be more flexible estate planning tools, trusts are much more nuanced than wills. Their setup can be lengthy and complex as you create a separate legal framework for managing your assets. That’s why it’s recommended you set one up with the assistance of a trust company.

Ongoing Administration

Trusts require ongoing administration on the part of the trustee. The person who manages your trust must keep detailed records about assets coming in and out of the trust. They are also responsible for providing annual reports to beneficiaries and filing the trust’s tax returns.

WILL VS. TRUST—WHICH IS RIGHT FOR ME?

Both a will and trust can preserve your legacy and give you peace of mind. Depending on your specific situation, you may find that one serves your needs better or that you could benefit from having both.

Protect your legacy by meeting with an estate planning attorney. A professional can review your particular affairs and goals, make recommendations, and advise you of potential tax advantages or implications.

While you may not be able to take your assets with you when you pass on, you can certainly preserve them for future generations. Riverview Trust Company acts as a fiduciary for clients, always making decisions in their best interests.

Get in touch with us to set up a consultation. We’ll show you how to secure your family’s future by positioning a lasting legacy for them today.