Both wills and trusts have a place in an effective estate plan. While these two legal documents have room for versatility, they do often accomplish different objectives.
Understanding the basic advantages and disadvantages of wills and trust can lead to a strong estate plan.
Benefits of a legal will
The purpose of a will according to information from NerdWallet resides in its ability to systematically pass on assets to heirs after the death of the will’s creator. The will becomes effective upon death and the straightforward process of will creation costs less than setting up a trust.
A will can contain provisions for establishing guardianship for minor children and it can direct funeral arrangements and parcel out assets to beneficiaries. Wills direct assets held by a single person, with assets in joint ownership going directly to the named survivor.
The legal requirements of wills depend in part upon state laws and individuals can structure a will in many different ways. A living will for example stipulates medical care preferences in the case of incapacity.
The advantages of a trust
Many experts consider a trust a more formidable document than a simple will. A trust has an added level of complexity and indicates an ongoing process with potential modifications as events warrant. The ongoing nature of a trust makes it harder to contest than a will, and a trust generally takes precedence over a will in the courts.
Trusts also allow for provisions to incorporate tax benefits, provide protection from creditors, increase privacy and avoid probate. An individual should closely consider the benefits of these documents in an estate plan.