Wills versus Trusts: Understanding the Key Differences and Deciding Which One is Right for You

Deciding between creating a will or setting up a trust is confusing. However, farmers, business owners, and high-net-worth individuals need to plan ahead and make sure their assets are distributed according to their wishes after they pass away. But how do you know whether adding a trust to your plan is the right option for you? In this blog post, we’ll explore the key differences between wills and trusts.

What is a will?

A will is a legal document that outlines your wishes regarding the distribution of assets left in your name after your death. Your will has a specific job, to say what happens to assets that don’t already say where they go through things like joint ownership or beneficiary designations. When you create a will, you name an executor (or personal representative) who will be responsible for carrying out your wishes. You can also name a guardian for any minor children you have. Depending on the amount of assets left in your name, a will may need to go through probate, which is the court-supervised process of validating the will and distributing assets. The probate process can take some time and can be costly. It’s administration through the court.

What is a trust?

A trust is a legal arrangement that allows you to transfer assets to a trustee. The trustee will manage and distribute the assets according to your wishes after your death, which can happen right away. In contrast to a will, assets in trust do not go through probate. Essentially, you’re creating your own administration outside of the court for any assets transferred to the trust. There are a few different types of trusts, including revocable and irrevocable trusts. With a revocable trust, you can make changes to the trust during your lifetime. With an irrevocable trust, the terms of the trust cannot be changed once it is set up and used in certain circumstances.

Key differences between wills and trusts

The biggest difference between a will and a trust is how they are administered after your death. A will goes through probate, whereas a trust does not. This means that assets held in a trust can be distributed more quickly and efficiently than assets in a will. Additionally, a trust offers more flexibility and control over how your assets are distributed, as you can set more specific terms for the distribution of your assets.

Which one is right for you?

The decision to rely solely on a will or to utilize a trust ultimately depends on your individual circumstances. If you don’t need your assets to be administered, you could rely on direct transfers to beneficiaries and a will may be sufficient to confirm your wishes. However, if you need administration of your assets and want to avoid going through the court, a trust may be a better option. Consulting with an estate planning attorney can help you make an informed decision based on your individual needs.

Financial organization

Whatever plan you choose, that plan won’t happen unless your assets follow the plan through things like deeds, beneficiary designations and joint ownership with a spouse. Lining up your assets to follow the plan determines whether or not your plan happens. A benefit of working with an estate planning attorney is that you can receive assistance in addressing real estate and business interests. You can also receive guidance on what your beneficiary designations on financial accounts and insurance should say.

Final thoughts

Creating a will or a trust is an important step in your estate planning journey. While it can feel overwhelming, it is important to act sooner rather than later to ensure your wishes are carried out after you pass away. Remember, the decision to create a will or a trust ultimately depends on your individual circumstances. Consulting with an estate planning attorney can help you make an informed decision and ensure that your assets are distributed according to your wishes. An estate plan is a strategy and we’re here to create a strategy with you.

In summary, understanding the key differences between wills and trusts is crucial for farmers, business owners, and high-net-worth individuals who want to ensure their assets are distributed according to their wishes. While the decision to create and add a trust to your plan ultimately depends on the complexity of your estate and your personal preferences, taking action to plan ahead is important for both your peace of mind and the well-being of your loved ones. Consulting with one of our estate planning attorneys can help you make an informed decision and create a plan that works for you. We've been helping people develop the right plan for 50 years.

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