What Is a Probate Sale? Trusts vs. Wills

What Is a Trust?

A trust is an arrangement that spells out who controls certain assets, and allows a third party to take control of certain assets. Usually, when a person creates a living trust, they remain in control but name a trustee who takes over if they are incapacitated or pass. A trust often gives more control than a will, but is also more complicated.

There are two types of trusts: irrevocable trusts, which are unchangeable, and each person in the trust must agree to changes. In a revocable will, you can add or remove beneficiaries and properties, and you retain control of your assets.

What Is a Will?

A will is a fairly simple legal document that details what will happen to your assets upon your passing. If you have children or pets, a will will spell out who becomes their guardian. It will also designate the recipients of your assets. However, with a will, your beneficiaries will still need to go through probate to receive the assets.

Trust vs Will

Unlike a trust, a will requires probate upon the owner’s death. In the case of a will, a probate court must control the distribution of the assets as stated in the will itself. These distributions can take a lot of time and be very costly! Sometimes, the probate process can cost nearly 10% of the value of the estate

A trust, on the other hand, does not require a probate process. A living trust is enacted right after it is created, and the creator of the trust can control their trust until their passing or incapacitation, in which case their trustee will take over to decide what happens to their assets.

A will is simply a legal document that instructs others about the deceased person's wishes with regard to their property and assets. While trusts can be used for financial planning after death, in general, a trust is simply an arrangement that allows a third party to control certain assets.

What Happens Without a Trust or Will

If a person passes away without a trust or a will, their assets are distributed according to state law. This usually dictates that the person’s assets will go to a surviving spouse or close blood relative. However, if you want to ensure that your assets go to exactly who you want them to, work with a financial planner to set up a trust or will.