Few of us want to ponder what life will be like after we're gone. And the results of a 2021 survey by Gallup bear that out: Just 46% of American adults reported having a will. A will and another type of estate planning tool, a living trust, lay out how you want your assets to be handled after you die. Trusts often make it easier to distribute assets than wills do, but typically are more expensive to set up.
Follow along to learn about wills and trusts, and which one might be better for deciding how your assets will be distributed following your death.
What Is a Will?
A will is a legal document, often written with help from an attorney, that designates how your assets will be distributed after your death. You also can write a will using an online service, which holds the same legal weight as one crafted by an attorney. Creating a will online typically involves less cost and less work, but may not be appropriate if you have an extensive portfolio of assets.
There are three key types of wills related to your assets: a simple will, which is a basic document you can write on your own or with assistance from an attorney; a testamentary trust will, which puts your assets in a trust that takes effect after you die; and a joint will, which covers at least two people (such as spouses).
Typical elements of a will include:
- Designation of an executor: You can name an executor, also known as a personal representative, to oversee distribution of your assets and payment of your debts after you're gone. An executor often is a trusted relative or friend.
- Selection of a guardian: You can include the person or people you want to care for your minor children following your death in your will. You should get the potential guardians' approval before adding them to your will.
- Designation of beneficiaries: Beneficiaries will receive the assets you leave behind, such as real estate, retirement accounts and family heirlooms. A beneficiary can be your spouse, your children or a favorite charity, for example.
You can also outline your funeral, burial or cremation wishes in a will, but experts recommend against doing so. Why? Because your will might not be found and reviewed until well after your death. Therefore, experts suggest leaving directions for your final arrangements in a health care directive or another legal document.
The Probate Process
Once you create a will, you can file it with what's known as a probate court. The court retains the document until you die. If you don't submit your will to a probate court, the executor must file it with the court following your death.
A probate court judge then verifies the authenticity of your will, makes sure the deceased person's creditors are paid and oversees distribution of the person's remaining assets. The judge also authorizes appointment of the executor and any guardian or guardians.
A will is a private document until the person who wrote it passes away. After that, the will and other probate court records become public documents, meaning anyone can view them.
The probate process might last eight to 12 months, ending with the distribution of assets. The process might take even longer for a complicated will involving a lot of high-value assets and can be expensive.
If you die without a will, a probate court judge typically will turn over your assets to your spouse, your children or other relatives. Because your wishes aren't in writing, the asset distribution may or may not reflect what you intended.
In rare instances, your will may be contested or challenged in probate court. But only your spouse, your child or someone mentioned in a current or previous version of your will can object to it. The objection might involve a suspected problem with the will, such as a question of whether the writer of the will was mentally capable of signing it or was forced to sign it.
What Is a Trust?
A living trust, or trust fund, is a legal structure that holds your assets, such as bank accounts and real estate. It's designed to ensure your wishes are carried out in terms of how your assets are distributed following your death. Trusts tend to be more detailed than wills, with explicit instructions that can allow for distributing assets over time to various beneficiaries, for example. Trusts may also restrict how beneficiaries use the money or other assets they receive.
While you may think of wealthy individuals when you hear "trust fund," anybody can establish a trust for their assets. One of the biggest advantages to doing so is avoiding probate: If you have a trust in place, your assets can be transferred efficiently to your beneficiaries without going through a lengthy and expensive court process.
The three types of people associated with a trust include:
- Grantor: The person who sets up the trust.
- Trustee: The person who manages the trust once the grantor dies.
- Beneficiaries: The people who receive the trust's assets once the grantor passes away.
There are two primary kinds of living trusts:
- A revocable trust lets you change details of the trust while you're alive.
- An irrevocable trust cannot be altered once the document is signed. Once the document takes effect, all of the assets in the trust belong to the trust, not to you.
Will vs. Trust: What's Better?
Some aspects of wills and trusts do overlap, and you can have both kinds of estate planning tools. If your decision comes down to cost and how you would like your assets to be transferred, one or the other may work better for your needs.
Situations when you might be better off with a will than a trust include:
- You prefer a simpler process.
- You own less than $200,000 worth of assets.
- You own only one property.
- You want to avoid the cost of establishing a trust.
- You want to create a legally binding document on your own.
Situations when you might choose a trust instead of a will include:
- You own at least two properties (particularly if the properties are in different states).
- You own more than $200,000 in assets.
- You want to avoid the time and expense of probate court.
- You want to cover situations aside from death, such as if you become incapacitated.
- You want to potentially shield assets from creditors.
The Bottom Line
Regardless of whether you pick a will, a trust or both, it's important to begin estate planning early so you can help ensure your assets are left to the people and organizations you want to have them. After all, you won't be able to dictate who ends up with your assets after you're gone.