By Anthony Brunson, P.A.
Wills and trusts ensure your assets pass to heirs according to your wishes. You may want to use a will if you’re married, have kids or own property. Setting up a trust is an extra step that makes sense if you have a large or complicated estate and/or need more control over how your assets are distributed.
Wills outline how assets should be managed upon your death, including guardianship of your children, distribution of property, charitable donations and whom you choose to serve as your executor (the person who ensures your wishes are carried out).
Trusts make sure your assets go to the right beneficiaries in the way you choose. Trusts need to be funded, which means that the various assets housed within a trust — property, investments, retirement and bank accounts — must be properly titled to be in the name of the trust.
Pluses and minuses of each
A will directs who’ll receive your property at your death and appoints a legal representative to carry out your wishes. A trust can begin distributing property before, at or after death.
A will covers any property in your name when you die. A trust covers only property that’s been transferred to it.
A will passes through probate — a court-supervised process overseeing the administration of the will — ensuring it is valid and that property gets distributed the way you wanted. A trust passes outside probate, which can save time and money. And a trust can remain private, while a will becomes part of the public record.
A will allows you to name a guardian for children and to specify funeral arrangements — a trust doesn’t. A trust can be used to plan for disability or to provide savings on taxes.
Wills don’t avoid estate taxes, though federal estate tax applies only to assets over $12.92 million in 2023. Some trusts can provide tax benefits and protect your estate from creditors. Trusts are less likely to be successfully challenged, which keeps your finances private. And trusts protect your assets if you’re incapacitated while still alive.
Wills don’t include assets owned jointly — those will transfer to the surviving co-owner upon your death. State laws for wills vary, but most require that a written will is signed by you and two witnesses before it becomes legally binding and effective.
Some trusts allow you to change beneficiaries and assets so long as you’re alive and physically and mentally able to do so. You can name yourself as a trustee and appoint a co-trustee.
Wills can be relatively affordable, while trusts, which are more complicated, can cost more but give you more control over your assets. You can take advantage of both wills and trusts in your estate planning, using a will to name guardians and stipulate your final wishes and a trust to provide for managing and distributing your assets.
Keep in mind that some assets, such as retirement accounts and life insurance policies, must pass through beneficiary designation and take priority over both wills and trusts. And your assets must be transferred into your trust or they will be of no benefit to your estate; you must fund the trust.
Consult with a qualified estate planning attorney to determine how best to use both a will and a trust in your estate plan.
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