Wills Versus Trusts In Estate Planning
Wills and trusts are both legal documents that allow you to specify how your assets will be distributed and who will become legal guardians of your minor children after your death. One of the key differences between the two is that trusts need not go through probate. This means the substance of a will is public while the financial matters described in a trust remain private.
There are several other differences in how wills and trusts are created and how they distribute assets. To decide which makes the most sense for your estate, it’s important to understand the pros and cons to each choice.
Strengths And Weaknesses Of Wills
A will is usually much easier to set up than a trust and is typically less expensive. As long as you are mentally competent, your will can be easily modified at any time to reflect changes in your life (birth of a grandchild, newly acquired property, etc.).
The biggest disadvantage of wills is that a will must go through probate, which can be difficult and time-consuming. The probate process first verifies that the will is valid and then notifies all your creditors of your passing. Debts owed to your creditors are paid out of your assets before anything can be distributed. If even one of your debts is disputed, probate can drag on for months or even years.
Strengths And Weaknesses Of Trusts
Like a will, a trust names a guardian for your minor children and outlines how your assets should be distributed after your death. Unlike a will, a trust protects assets from creditors, avoids probate and can be used to distribute assets while a person is alive as well as after death. Trusts are often used to minimize or avoid taxes and provide for minors and adults with mental disabilities.
The big disadvantage of trusts is that they are typically complex documents and time-consuming to create. As a result, trusts are more expensive and difficult to modify or revoke.