Estate planning isn’t exactly the sort of thing most people like to think about over their morning coffee. Pondering your mortality — not to mention what will happen to your assets and property, let alone your children or even your pets — is difficult, to say the least. Compounding these emotional issues are the basic challenges of where and how you get started.
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Terms like will and trust are thrown around commonly — anyone who has ever watched a prime-time crime drama has likely heard them copiously — and the average person might think they’re interchangeable. However, there are some key differences you must be aware of.
The National Council of Aging defines these two documents in a simple way: “A will is a simple legal document that provides instructions on how to distribute property to beneficiaries after death, while a trust is a complex legal contract that allows you to transfer your property to an account to be managed by another person.”
Understanding which option is right for you might not seem as simple. Fortunately, GOBankingRates talked to an expert who can parse things down for you.
Trusts Give You Control During Your Lifetime
With decades of experience in the industry, Les Perlson, managing general agent for National Plan Administrators, knows more than a thing or two about helping people determine whether a trust or will is best for them.
He said that the core difference between a trust and a will is that a trust takes effect as soon as it’s created, while a will only takes effect after you’ve passed away. It’s a pretty significant difference that usually helps tailor Perlson’s advice to his clients.
“When a client’s main goal is maintaining control over assets during their lifetime while also providing for heirs, I typically recommend a trust,” he said. “Trusts allow you to appoint a trustee to manage the trust assets for your benefit or as you direct.”
The fact that a trust is a private document, while wills become public records after your death, also helps give you a greater measure of control.
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Wills Focus on Assets After Death
Perlson added that his clients who are primarily focused on distributing their assets after they pass often find a will to be sufficient. Wills are generally simpler, and less expensive, to create than a trust.
That said, preparing a will isn’t all smooth sailing. Wills must go through the probate process, which involves the court overseeing distribution of your assets. Conversely, trusts avoid probate, allowing a quicker and less costly distribution of assets to your heirs once you’re gone.
Trusts Can Be Better for More Complicated Situations
Perlson’s experience has shown him that trusts are more ideal for clients who have young children or who are dealing with complex family dynamics. He added that people with a desire for privacy or significant assets are better candidates for trusts.
“For most average clients, a basic will paired with beneficiary designations on financial accounts and life insurance is typically enough to meet their estate planning needs,” he said. “But when in doubt, it never hurts to consult an expert.”
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This article originally appeared on GOBankingRates.com: Creating a Will vs. a Trust: Which Is Right for You?
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