What Are the Key Considerations When Choosing Between a Will and a Trust?

What Is the Difference Between Trusts and Wills?

Wills and trusts are key components for estate planning, and both ensure that the assets listed in either reach their intended beneficiaries after the original asset owner’s death. But there are some key differences.

Wills don’t go into effect until the estate owner passes, while trusts are usually live as soon as the creators sign the trust and the assets are transferred.
Wills usually need to go through probate (a public process) while trusts don’t.
Wills aren’t activated if the estate owner becomes incapacitated somehow, only after their death. Trusts are active once funded.

How Do I Choose Between a Will and a Trust?

The answer to that is: It depends on various factors, including the size and complexity of your estate and your relationship to your beneficiaries. That said, it’s crucial to understand that this doesn’t have to be an either/or situation; often, estates use both wills and trusts to accomplish their goals. That’s because each has pros and cons, or things one can do that the other can’t.

Pros and Cons of Wills

Pros:

A will is more likely to ensure your wishes are granted than dying without a will, known as dying intestate. In the latter situation, the courts will determine the distribution of assets and only consider family members. If you want some assets to go to nonfamily members or charitable organizations, having a will is vital.
A will is the best legal mechanism for assigning legal guardianship to any minors orphaned by your death. Note that trusts have no authority regarding guardianship of minors. If a will doesn’t exist or specify a guardian, the court will determine who the guardian will be, for better or worse.
A will can include your funeral preferences.

Cons:

A will is not a private document. When the estate owner passes away, it will likely need to go through probate court, which is public. This means anyone could learn the value of the estate and the terms of the will.
A will may have more significant tax implications than a trust. There are many variables affecting that.
A will is often subject to creditors’ demands, meaning the estate may be allocated to pay off debts rather than to hand down to beneficiaries.

Pros and Cons of Trusts

There are multiple types of trusts, each with its own set of pros and cons. If you’re considering using a trust (and there are many good reasons to do so), it’s highly recommended that you work with an experienced estate planning attorney to find the trust(s) that best fits your needs.

Pros:

Trusts are private and usually don’t go through probate court. That means the general public has no access to any information about it.
Depending on the types or sizes of the trust, there may be positive tax implications.
Depending on the type of trust, the assets held in it may be exempt from creditors’ claims or lawsuits, making them popular with people whose careers frequently lead to litigation (doctors, lawyers, etc.).

Cons:

As noted above, a trust can’t legally mandate guardianship of orphaned minors. That may only be done through a will.
A trust can’t provide funeral preferences.

Because of the pros and cons of each, it’s common for individuals to create both a will and trust for a complete estate plan. That helps ensure the estate is well-planned, covering many bases and creating some privacy for the owner where necessary.

Can a Will or a Trust Be Challenged in Court?

It’s possible for either, although it doesn’t happen frequently. Similar grounds could be used to challenge a will or a trust. In general, the person challenging either must have some logical grounds to do so, not just be annoyed that they didn’t get what they thought they should. Only those who have an interest in the assets are allowed to challenge, meaning anyone who is named as a beneficiary, is the heir of the deceased, or creditors (but again, some types of trusts are exempt from creditors). The reasons someone can contest a will or a trust include:

Lack of mental capacity. If the person whose assets are addressed in the will or trust was deemed not of sound mental capacity, the assets may not be distributed according to their wishes. This may include someone who struggles with dementia or alcoholism/drug problems.
Suffered undue influence or fraud. Sometimes, others take advantage of the elderly and convince them to change their will or trust to benefit the swindler rather than the honest beneficiaries. Court challenges can help determine if this was the case or, as also happens at times if the will was forged.
Multiple wills. This may occur when someone dies while updating their estate plan. In many cases, the court will go with the most recent version.
Invalid will or trust. If the will or trust is not written, signed by its maker in the presence of two witnesses who aren’t named in the estate plan, and signed by the witnesses, the plan may be invalid.

What Should I Do if I Need to Begin Estate Planning?

Call Cava & Faulkner at 916-685-1225 for a free consultation. Every estate is unique. It’s best to work with experienced, knowledgeable estate planning attorneys who can go through the specifics of your estate to help determine what tactics and tools could have the best results for your estate and beneficiaries. We understand how vital it is to you to come up with a plan that meets your needs and wishes as closely as possible.