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The Wealth Advisor
Wills vs. Trusts: In Plain English
Everyone has heard of wills and trusts. Most articles written on these topics, however, often presume that everyone knows the basics of these important documents. But, in reality, many of us do not – and with good reason – as they’re rooted in complicated, centuries-old law. So, if you are “fuzzy” about wills and trusts, know that you are not alone.

Wills vs. Trusts: Defined
Let’s take a minute to define both a “will” and a “trust”:
 
Will. A will is a written document that is signed and witnessed. A will is considered a "death" document as it only goes into effect when you die. 
 
A will:
  • provides for the distribution of assets owned by you, but not assets directed to others through beneficiary designations (e.g. life insurance or retirement benefits)
  • sends assets in your individual name or payable to your estate through the probate process
  • allows you to appoint permanent guardians for your minor children
  • names the person you wish to settle your estate (e.g. executor or personal representative)
  • does not always include protective trusts for beneficiaries and tax planning because many wills are overly simplified
  • permits you to revoke or amend your instructions during your lifetime
  • tends to cost less than a trust on the outset but typically costs more to settle your estate after death
Trust. A trust is a legal written document that is signed and notarized.  A trust is effective during your lifetime, during any period of disability, and after death. Because the trust is effective during your lifetime and you can change it, it’s referred to as a "living" document. 
 
A trust:
  • has lifetime benefits
  • provides for the distribution of your assets
  • avoids probate if fully funded
  • requires the transfer of assets to the trust
  • provides for a successor trustee upon your death or incapacity
  • allows for the management of your property – even if you are incapacitated
  • can address appointing disability guardians for minor children
  • often includes protective trusts for beneficiaries and tax planning
  • permits you to revoke or amend your wishes during your lifetime 
  • costs more than a simple will on the outset but less upon administration of your estate
The Probate Process: A Key Element in Deciding Between a Will and Trust
 
One key element in deciding between a will and a trust is understanding the probate process. The term “probate” – which literally means “proving” – refers to the process wherein a decedent's will must be authenticated, outstanding legitimate debts paid, and assets transferred to the beneficiaries.

The downside is that probate can take a long time - even years - it can be expensive in many places and the entire process is public, meaning anyone can determine exactly who got what and how to contact them. In some cases, a potential upside of probate is that it can more effectively cut off creditor claims. 
  • Probate Guaranteed with a Will. If you use a will as your primary estate planning tool, you own property in your individual name, or property is made payable to your estate, probate is guaranteed.
  • Probate Avoided with a Trust. If you use a fully-funded trust as your estate planning tool, probate is avoided.
The Bottom Line on Wills vs. Trusts
 
Everyone’s situation is different, so it is important to analyze your situation – and what the future may hold – so that you can determine what is right for you.

Without an estate plan in place, you and your family are left unprotected.  If you have questions about what approach is best for you, please give us a call. You do not have to make these decisions alone.
Sound Estate Planning, PLLC • 152 3rd Ave. South, Ste. 107 • Edmonds, WA 98020 • (425) 967-7287