When it comes to estate planning, two legal tools are commonly discussed and those are wills and trusts. Both are designed to distribute your assets according to your wishes after you are gone, but they work in different ways. According to Adam Crouse, an estate planning attorney with Aleman and Associates, those differences can have significant financial and legal consequences.
“A will is a legal document that outlines how a person’s property should be distributed after death,” Crouse said. “It can also name guardians for minor children and designate an executor to carry out its instructions. Wills are relatively simple and inexpensive to create, which makes them a common starting point for estate planning.”
Wills are required to go through probate, a court-supervised process that validates the documenta and oversees the distribution of assets. Probate can take months or even years, depending on the complexity of the estate and local court backlogs. Because probate records are public, a will does not offer privacy. Anyone can obtain details of the estate simply be visiting the local Register of Wills office or looking online.
“A trust is a legal arrangement in which a person, known as the grantor, transfers assets to a trustee, who manages them on behalf of the beneficiaries. Trusts can be established during a person’s lifetime. These are known as living trusts,” Crouse said. “They can also be created after death through a will. These are known as testamentary trusts.”
One main advantage of a trust is that it can bypass probate entirely.
“Assets held in a properly funded living trust are distributed according to the trust’s terms without court involvement, often more quickly and privately than a will,” Crouse explained. “Trusts can also provide more control, such as setting conditions on when and how beneficiaries receive assets. However, that flexibility comes at a cost as trusts are generally more expensive and complex to set up. They also require ongoing maintenance as assets must be formally transferred into the trust to be effective.”
Crouse stated that the choice between a will or a trust is basically due to priorities. Those that want cost and simplicity may favor wills while a trust would be more appealing to those who want speed, privacy and control. Estates that are large or complex may need to consider a trust due to privacy or managing distributions over time.
“Many estate plans use both,” Crouse said. “A trust to manage major assets and a “pour-over” will to direct any remaining property into the trust at death. The most important step is having a plan at all. Without a will or a trust, state laws determine how assets are distributed, which may not align with personal wishes.”
Crouse also stated that laws and individual circumstances vary which is why it is critical to talk to an estate planning attorney to determine the best approach. In the end, the decision between a will and a trust is less about choosing a winner and more about choosing the right tool for the job.
To learn more about trusts, wills and estate planning, contact Crouse by calling 302-990-8801 or by email. Aleman and Associates is located at 15 North Walnut Street, Milford.
