The material presented here is for educational purposes only, and is not intended to be used as financial, investment, or legal advice.
Will vs. Trust: What Should I Choose?
Wills and trusts are legal documents that determine how your assets are distributed after your passing. This broad overview of both documents will provide a foundation for making the decision that’s right for you and your family. We’ll consider tangible assets like property, as well as last wishes and family arrangements.
Making a will or creating a trust isn’t necessarily something you want to think about. But it’s one of the most important decisions you can make. You’ll have the knowledge that your family will be taken care of if the unexpected happens, and the peace that comes with having things settled on paper. Before you can tick the “estate planning” box off your to-do list, you’ll need to understand the basics of wills vs. trusts and make some critical decisions first.
What is a Will?
A will is a legal document that determines how someone’s personal assets will be divided upon death. It does not include joint assets, which become the sole property of the joint party upon death. It’s not just about money and possessions, though.
Your will can also include instructions for funeral arrangements and burial or cremation, as well as details on who will care for your children or other dependents going forward. That’s why it’s critical to make a will if you have children, personal assets or both.
- The people who receive your assets are called beneficiaries. You may designate a single beneficiary or multiple beneficiaries. Consult your Wills & Trusts advisor for details on who can be named a beneficiary and how many beneficiaries you can select.
- An executor is a person selected to oversee the process of distributing those assets. Their job includes making sure that any debts and taxes are paid upon the will holder’s death, and then distributing assets and following last wishes as outlined in the will.
A will only goes into effect after death. At that time, the will typically goes into probate. Probate is the legal process by which the courts ensure all outstanding debts are paid by the deceased’s estate and the will is executed properly.
“Probate involves court fees and a waiting period, as well as potential legal costs with an attorney. These activities will need to take place during a stressful time since the family is mourning,” says Matt Osborn, Wills & Trusts Supervisor at Desert Financial. “With a little planning, you can leave your family with a smoother transition so they can carry out your wishes.”
What is a Trust?
A trust is also a legal document with instructions on how your assets are divided. Unlike a will, your trust goes into effect immediately after you sign it. It does not include naming a guardian for your dependents or personal wishes such as funeral arrangements.
If an asset such as an owned home is transferred to the trust, that asset isn’t subject to probate after death. This helps avoid delays in transferring property and other large assets to your beneficiaries when the time comes — they quickly inherit the item or account in question.
There are many types of trusts, however, we are going to focus on two of the more common options: revocable and irrevocable trusts. A revocable living trust (sometimes just called a living trust) can be altered or completely revoked at any time prior to death. An irrevocable trust cannot be altered or terminated unless the named beneficiaries give permission.
Why Would You Need a Trust?
You can have a will and a trust; depending on your circumstances, one or both may be recommended. As a rule of thumb, you’ll want to create a will if you have dependents or wish to spell out specific instructions for funeral arrangements. Wills are also useful for bequeathing smaller items such as a favorite watch or heirloom tea set. For larger assets and major purchases, a trust may be preferred.
“At the most basic level, a trust is a tool that can control and manage your estate, while a simple will is merely a statement of your wishes,” Osborn explains. “The value of the estate is only one factor. The need for control is an equally important aspect that [should] be examined.”
Will vs. Trust: What’s Right for You?
When planning your estate, you’ll want to consider your personal preferences, what’s most important to you, and your family’s short- and long-term needs. It’s not a one-size-fits-all process.
Attending one of our online Wills & Trusts seminars is a great place to start. You’ll get a deeper overview of the basics of these legal documents from financial planning experts. After that, the next step would be meeting with a professional to discuss your options and put together a plan that works for you. There’s no obligation or cost to meet with a Desert Financial Wills & Trusts advisor. Just fill out this quick contact form and we’ll get back to you!
Document preparation services are offered through Desert Financial Federal Credit Union; an Arizona Supreme Court Certified Legal Document Preparation Business Entity (CLDP #81024). Legal document preparation services are not insured by the NCUA and have no credit union guarantee.