Will vs Trust: What is the Best For Seniors?

It’s important to understand the distinctions between a will and a trust and know which one would most benefit you and your beneficiaries.

Most people have heard of wills and trusts when it comes to end of life or retirement planning. However, it is true that many don’t know the difference between them. It’s important to understand the distinctions between a will and a trust and know which one would most benefit you and your beneficiaries.

What is a will?

A will is a document that states how your affairs will be handled after you pass. Wills are a major part of estate planning and they deal with how your assets are distributed. For many larger assets, it’s not necessary to have a will, because there are legalities when it comes to distributions. For instance, bank accounts or your home will go to your joint partner, while retirement accounts and life insurance policies have already-named beneficiaries. With a will, you’ll want to name a guardian for your minor children and name an executor who will carry out your will. Executors pay taxes and debts, close your accounts, and distribute the items named in your will. It is recommended that you use an advisor or lawyer versus a family member as your executor.

What is a trust?

A trust is a fiduciary arrangement that passes assets to a trustee who will hold those assets for a third party beneficiary. Trusts can control how your assets are distributed. If you are leaving money for a minor or wish to delay releasing the funds, a trustee can carry out those wishes. Trusts relieve your beneficiaries from paying estate taxes, they protect your assets from creditors, and determine where and when your assets are distributed.

Should I have a will or a trust?

Using a will versus a trust depends on your situation. There are aspects of a trust that a will cannot determine and vice versa, but the vast majority of people can get away with just a will. Remember: you must have a will to name a guardian for minor children. There are circumstances when you would want to use a trust, like if you want to distribute your assets at different times. Trusts take more time to set up and more paperwork, but they are much more likely to hold up in court.

It’s recommended to speak with a financial advisor and let them help you determine if you are more suited to a will or a trust—or both.

Related Articles:

• Financial Planning: Take Control of Your Finances
• Everything You Need to Know About Making a Will
• Don’t Let End of Life and Funeral Expenses Bury You In Debt