Investopedia.com
By Matthew Jarrell, November 13th, 2024
Both transfer an estate to heirs, but only a Trust can skip probate court
A will is a legal document that provides instructions for distributing property to beneficiaries after death. A trust is a legal structure that allows an individual (the grantor or trustor) to transfer assets to a trustee for management and distribution according to the grantor’s wishes. Trusts can be used both during a person’s lifetime and after death, while wills only take effect after death. Both can be practical estate planning tools, either separately or together.
KEY TAKEAWAYS
- Trusts can be structured to operate during the grantor’s lifetime or after death, while wills are only effective upon death.
- A will is a legal document that specifies how your affairs will be handled and how assets will be distributed after death.
- A trust transfers assets to a trustee, who manages them according to the terms specified by the grantor for the benefit of designated beneficiaries.
A will may be the least expensive and most efficient choice for small estates with easily transferred assets and simple bequests. A trust without a will can present problems concerning assets outside the trust that become subject to intestacy laws.
Larger and more complex estates may benefit by using both arrangements.
It’s usually advisable to have a carefully drafted will even if most assets are held in ways that avoid probate. A will and a trust can complement each other, allow swift asset transfers, maintain confidentiality concerning sensitive assets and directives, and prevent intestacy concerning estate assets whose disposition isn’t governed by a trust or other arrangement for individuals of means and those with privacy concerns.
Matthew Jarrell, Founder, DocSpot Financial
