The Key Differences Between Wills and Trusts (Why You May Need Both)

Have you ever wondered what will happen to everything you've worked so hard for when you're gone? It's an uncomfortable question nobody likes to think about. That's why proper estate planning gives you absolute control over your assets and where you want them to go exactly after your death. 

Did you know that a significant number of Americans don't have a plan in place for their estates? In fact, a 2022 Gallup poll revealed that only 46% of U.S. adults have a living will. The reasons for this are varied, from misconceptions about the process to a lack of awareness about its importance. 

Smart estate planning utilizes both wills and trusts as complementary tools. While these two legal documents have similarities, they play very different roles in managing your legacy. If you're thinking about your comprehensive estate planning, you must know that having just one of these two legal documents is insufficient to fully protect your family's future interests. That's why you must understand the key differences between wills and trusts, as it empowers you to check all the boxes, so your wishes are legally binding.

In this article, we'll explain exactly how wills and trusts aren't the same thing. More importantly, you'll learn why you should set up both legal documents under the guidance of an estate planning attorney. 

What is a Will?

Also known as a last will or testament, a will is a legally binding document that dictates how your assets and property will be distributed after your death. It's an essential estate planning tool that dictates how your assets are distributed to your heirs and beneficiaries. 

In your will, you can name beneficiaries to inherit specific items like cash, real estate, vehicles, investments, personal possessions, etc. If you have minor children, a will allows you to nominate a guardian to take care of them until they attain a specified age. In fact, a will must be prepared in line with State law as its implementation requires a legal process. As the creator of the will (testator), you can also designate an executor to carry out the instructions in your will. The instructions in the will may include guardianship of your minor children, charitable donations, distribution of your properties and assets to your heirs and beneficiaries, and funeral preparations. 

However, your will only take effect after you pass away. Upon your death, the will is filed at your Country's probate court, initiating the probate process. Probate is a judge-supervised proceeding where your will becomes part of the public record accessible to anyone. The process can also be time-consuming and eat up significant portions of your estate through fees and taxes.

While it is essential to have a will, having a will alone may not fully protect your legacy the way you want. This is where trust comes in as a complementary estate planning document.

What is a Trust?

A trust is a fiduciary arrangement in which a third party, known as the trustee, holds and manages wealth, properties, and assets on behalf of your named beneficiaries. As the grantor of the trust, you determine the exact terms of the trust agreement.

There are two key different types of trusts that offer distinct advantages: revocable living trusts and irrevocable living trusts. Other types of living trusts include special purpose trusts, charitable trusts, and special needs trusts. A revocable living trust is one of the most popular types of living trust due to its flexibility. With a revocable trust, you can make changes anytime during your lifetime and maintain complete control over your assets. Upon your death, the trust assets will be transferred to your beneficiaries according to your wishes without going through probate court. 

On the other hand, an irrevocable trust, often utilized for specific estate planning purposes, offers a unique feature once established as its terms are set in stone. An irrevocable trust is a situation whereby the assets are handled by a trustee who is not the grantor. Once the grantor has successfully transferred the control and beneficial interest of the trust assets, the income from the trust assets is immediately excluded from the grantor’s taxable income and all the assets included in the grantor’s estate, potentially leading to tax benefits. In addition, an irrevocable trust provides a layer of protection from creditors and lawsuits, which further enhances the security of your assets.

Trusts, regardless of their type, offer a host of benefits that make them a superior choice for estate planning. They provide enhanced privacy, as they don't undergo public probate proceedings. For instance, probate in states like California can be complicated and expensive, which is why most residents of California have an estate plan with a trust. Similarly, if you own properties in two states, like Florida and Pennsylvania, you'll have to deal with the problem of having to approach both the probate in Florida and Pennsylvania, which is likely to create a problem for you. With a living trust, you can avoid all these problems. Living trusts also cater to beneficiaries with special needs without jeopardizing their government benefits. When used together with a will, trusts become an indispensable estate planning tool to dictate precisely how and when your assets are distributed after your demise.

Key Differences Between Wills and Trusts

Of course, both trust and will similarly empower you to distribute your assets to your heirs and beneficiaries after you die. While wills and trusts are both vital estate planning tools, they differ in several ways. When you clearly understand these key differences, you'll be able to make informed decisions when developing a comprehensive estate plan under the guidance of a reputable estate planning attorney. Here are some comparisons to help better understand the differences.

(1) Probate vs. No Probate

One of the most significant differences between a will and a living trust is that a will must go through the probate process after your death. In contrast, a living trust allows your assets to be distributed directly to beneficiaries outside of probate court. Probate can be a lengthy, complicated, and public process in which anyone can view the details of your estate's value and beneficiaries. Avoiding probate through a trust keeps your affairs seamlessly private.

(2) Privacy

Speaking of privacy, the contents of a will become part of the public record during probate. This means that your will is accessible to every Tom, Dick, and Harry. On the other hand, the details of a living trust are kept confidential. This is because only those directly involved in managing the trust can access its instructions and assets.

(3) Control of Assets 

With a will, you only dictate what happens to your assets after death. A living trust, however, can allow you to maintain control and management of the assets during your lifetime as the grantor. This can be beneficial from an estate tax planning perspective.

(4) Asset Protection and Taxes

Trusts generally provide more asset protection from creditors and lawsuits than wills. Certain irrevocable trusts can help minimize your estate taxes by removing some of your assets from your taxable estate.  

(5) Ability to Make Changes

One key distinguishing factor between a will and a living trust is the ability to make changes. A will can be updated or modified at any time before the death of the testator to reflect changes in your wishes or situation. On the other hand, a living trust can be updated or not, depending on the type of trust. For instance, a revocable living trust can be modified or updated depending on the circumstances of the grantor, but an irrevocable trust cannot be altered once established.

(6) Cost and Complexity

While more expensive and complicated to set up initially, trusts can save significant money in the long term by avoiding costly probate expenses and legal fees. However, trusts do involve ongoing administrative costs and tasks. A living trust costs around $1,000-$10,000, depending on how it is created online or by an expert attorney. On the other hand, wills are generally more affordable as they are simple documents. More specifically, a will can cost between $99-$8,000 depending on how it is created, including DIY, online, or via an estate planning attorney. 

Don't Delay - Secure Your Family's Future Today with Benjamin Wealth Advisors!

Are you one of the 54% of Americans going through life without an up-to-date will? Or among the category of those who've neglected setting up a revocable living trust? Delaying your estate planning puts your family's future at unnecessary risk.

At Benjamin Wealth Advisors, our seasoned team of attorneys, certified estate planners, and certified trust and financial advisors can swiftly organize all the right protections for you— both a pour-over will and revocable trust customized to your unique situation. Don't leave your legacy to chance.

Our streamlined process allows you to complete all intake forms online in under 10 minutes. From there, we'll have your personalized will and revocable living trust finalized within 30 days, guaranteed. You'll have complete control over how your assets are managed and distributed, avoiding probate hassles entirely.

Stop procrastinating on securing your family's tomorrow. This vital planning isn't just for the ultra-wealthy individuals- it's a necessity for any responsible homeowner, parent, or individual with assets they've worked hard to build.

Protect the life you've created by contacting Benjamin Wealth Advisors today. Investing in our premium estate planning services is the responsible choice to comprehensively safeguard your legacy. Call 1-844-239-2592 or visit us at BenjaminWealth.com to schedule your free consultation now.  

Your loved ones are counting on you to take action - don't let them down. With convenient financing options available, there's no excuse to delay this invaluable peace of mind any longer.