What is the difference between a will and a trust, and which one should I have?

A will and a trust are both estate planning tools that allow individuals to distribute their property after they pass away. However, there are some key differences between the two.

A will is a legal document that outlines how an individual’s assets will be distributed after their death. It appoints an executor, which is responsible for carrying out the instructions in the will, paying any debts or taxes owed by the estate, and distributing the remaining property to the beneficiaries listed in the will. A will goes into effect after death, and the estate will go through the probate process, which can involve court supervision.

On the other hand, a trust is a legal entity that holds and manages property for the benefit of the beneficiaries during the individual’s lifetime and after their death. The individual, known as the grantor, creates the trust and appoints a trustee to manage the trust’s assets. The trustee has a fiduciary duty to manage the trust in the best interests of the beneficiaries and must follow the instructions outlined in the trust agreement. A trust can be revocable, meaning it can be changed or terminated during the grantor’s lifetime, or irrevocable, meaning it cannot be changed or terminated once it is created.

One of the main advantages of a trust is that it can help avoid probate, which can be time-consuming and expensive. Trust assets can pass directly to beneficiaries without court supervision, which can help preserve privacy and reduce administrative costs. Additionally, a trust can provide more flexibility in how assets are distributed, as it can be structured to provide ongoing support for beneficiaries, or to distribute assets in a more tax-efficient manner.

So, which one should you have? It depends on your individual circumstances, goals, and preferences. If you have a relatively simple estate or few assets, a will may be more appropriate. However, if you have a more complex estate or significant assets, a trust may be more advantageous. Additionally, if you are concerned about privacy, minimizing administrative costs, or want to provide ongoing support for beneficiaries, a trust may be a better option.

It is important to note that both wills and trusts have limitations and exceptions, and the laws surrounding estate planning can vary by jurisdiction. It is always a good idea to consult with a licensed attorney who specializes in estate planning to evaluate your specific needs and determine the best course of action.