If you have accumulated considerable wealth and are making plans to pass it on to your heirs, you may be wondering whether a trust or a will is the better path to take. While both of these instruments help you plan ahead to dispose of your estate and name your beneficiaries and heirs, they serve that purpose in different ways.
How Is a Trust Different from a Will?
When you draw up a will, you are essentially stating your wishes for how you want your assets disposed of after your death. The executor of the will acts to see that your wishes are taken care of. In this document, you could make bequests to others, leave money to charity and pass on your wealth to your heirs.
With a trust, you are essentially transferring over your property to the trust even while you are alive. You will retain control of the assets while you live, and after your death the assets will be passed on under the supervision of the trustee, depending on your instructions for the trust. You will have to be careful to transfer your assets to the trust though. The trust will handle only the assets that you transfer to it, so you will have to plan accordingly and not overlook anything you want passed on through the trust. (See also: Will vs. Trust -- The Difference Between The Two.)
Avoid Lengthy Probate Situations
If you set up a will to take care of your inheritance, it doesn’t mean that your assets will automatically pass on to your beneficiaries upon your death. Rather, the will has to first go through a legal probate process. This is a process during which a court will oversee the process of paying off any creditors and then parcel out your assets based on how you set up your will. This means that it will typically take a longer time for your assets to actually reach your heirs than would occur with the use of a trust. Not only that, a probate process also involves money spent on an attorney, an appraiser and court fees. By setting up a trust, you can avoid the time and cost involved in the probate process.
Protect Your Heirs’ Privacy
Another downside of going with a will is that the probate process plays out in a court and the public has access to your information. This could be a negative for your heirs who might prefer to maintain their privacy. With a trust, your assets are disposed of discreetly and privately by your trustee and your attorney.
Trust Provides More Control
With a will, you are merely directing how your assets will be divided among your heirs and beneficiaries upon your death. However, with a trust, you could direct when your heirs will have access to your wealth. For instance, you could specify that your trustee provide funds to your children for their college education or that they get access to the funds when they marry or have children. And you could also set up the trust so that your assets remain in your family even if your children get divorced.
Additionally, if you become incapacitated in some way before your death, a will cannot help you manage your affairs. With a trust, you could set it up in such a way that your trustee can handle your affairs for you during the time that you are not capable of taking action. (See also: What are the differences between a revocable trust and a will?)
The Bottom Line
You could opt to dispose of your assets by setting up a trust or by making a will. A trust does offer the wealthy some advantages over a will. For one, your heirs will need to wait while a will goes through the probate process in court, while they can access your assets sooner with a trust. You can also retain more control with a trust. However, you will have to be careful putting your assets into the trust. The trust doesn’t control, and can’t dispose of, any assets that you might overlook.