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What is the difference between a will and a trust?

On Behalf of | May 29, 2024 | Estate Planning |

When planning for the future, it is important to understand the difference between a will and a trust.

Both serve as tools for managing and distributing assets, but they function in distinct ways.

What is a will?

According to CNBC, 67% of Americans do not have an estate plan. A will is a legal document that specifies how a person wishes to distribute their assets after their death. The person creating the will, known as the testator, lists their assets and designates beneficiaries. The will also names an executor, who carries out the testator’s wishes.

What is a trust?

A trust is a legal arrangement where a person, known as the grantor, transfers assets to a trustee. The trustee manages these assets for the benefit of the beneficiaries. A grantor can establish a trust to take effect during their lifetime or after their death.

What are the key differences?

The main differences between a will and a trust revolve around their timing, cost and complexity. A will takes effect only after death and requires probate, whereas a trust can take effect immediately and bypass probate. Wills are usually simpler and less expensive to create but can result in higher costs and delays during probate. Trusts, although more complex and costly to establish, offer greater control over asset distribution and privacy.

It is important to have an estate plan to ensure the distribution of your assets in accordance with your wishes. Consider the pros and cons of a will or trust to decide which is best for your situation.