Trusts and wills have the same essential function: passing your property to your heirs after your death. However, the differences in how the two documents operate should be carefully considered before choosing between them.
A trust offers several advantages over a will. First, a trust enables your heirs to avoid probate, whereas wills are required to go through probate. Probate is the process through which a court transfers ownership of your assets to the people designated in your will. For example, the probate court would supervise the sale of your home and the distribution of the proceeds in accordance with the will’s named beneficiaries. There can be significant costs and delays associated with probate, and if you die and your heirs need access to money immediately, probate will make that unlikely.
To establish a trust, you first create it and then designate your various assets (retirement accounts, bank accounts, homes, cars, life insurance, etc.) to be transferred to the trust upon your death. Alternatively, you could transfer assets to the trust while you are living, to facilitate managing the assets in case you were to become disabled or incapacitated. Either way, after your death, the trustee you’ve chosen will gather your assets and distribute them (or the proceeds of their sale) to the beneficiaries named in your trust. There is no waiting period involved in trust administration, which means that your beneficiaries have much faster access to the funds you’ve left them.
Another advantage of a trust is that it gives you more control over the distribution of your assets than a will does. With a will, if the person to inherit property is a minor, the probate court must name a conservator to manage the money until the minor reaches 18. In addition, the probate court supervises all distributions of money for that minor’s health, education, maintenance, and support, such as living expenses, school tuition, and orthodontia. The court can also exercise its judgment to disallow any expenditure. But with a trust, you can appoint a trustee who will make all spending decisions for minors according to your wishes, and you can specify the age at which a given beneficiary can take control of his or her inheritance. You can even create a lifetime trust for your beneficiaries, which can provide some creditor protection and other benefits to safeguard their inheritance.
Third, unlike the terms of a will, the terms of a trust are private. Probate proceedings and documents are public record, meaning that anyone can read the terms of your will or the circumstances of its administration. But because a trust is a contract, the distribution and terms of your estate are private and the details are not accessible by the public, including the nature and amount of your property or the identity of your beneficiaries.
A trust, when properly created and funded, is usually an easier, faster, and less expensive way to pass your assets to your beneficiaries, which is especially true if minor children are involved.