Last Will and Testament vs. a Trust: What's the Difference, and Which One Is Right For You?
Estate planning is an important part of ensuring that your assets and possessions are distributed according to your wishes after you pass away, and one of the common strategies used is a last will and testament or a trust. While both serve similar purposes, they do have distinct differences which you should be aware of before making a decision.
Can Your Heirs Play Nicely Together or Do You Need More Control?
Let’s use an analogy to explain the difference between a last will and testament versus a trust. Think of your estate as toys in a toy box – you want these toys divided up among your kids in the way you prefer after you pass away. With a last will and testament, it’s like giving the toys directly to them when you go. You can determine who gets specific items and in what order, or you can say all the toys are for all of them to share. This may work well if your kids play nicely together, but it does not offer much control over how those items are used after you’re gone.
A trust is like a toy box with someone else (the trustee) in charge of it. You give this person instructions about when your kids should be allowed to play with the toys and what age they must reach before being able to keep the toys without putting them back into the box. With a trust, you have more control over how your assets are managed and distributed among your heirs after you pass away.
Understand Your Unique Circumstances Before Making a Decision
Ultimately, the choice between a last will and testament versus a trust comes down to your individual circumstances and preferences. If you want a straightforward estate plan that’s easy to understand, then a last will may be the way to go. But if you have more complex finances or require more control over how assets are distributed after your death, then setting up a trust is probably the better option.
If you’d like to learn more about either of these strategies, there are many helpful resources available online such as the American Bar Association's Estate Planning Guide, NOLO's guide to Trusts, and Investopedia's Last Will and Testament guide, among others.
We also offer several FREE resources available to you, packed with valuable information you do not want to miss! With these helpful resources, you can create an estate plan that meets both your financial goals and desired outcomes. Contact us today to find out how you can make a more informed decision about which strategy is right for you.