Wills and trusts are tools used to ensure your assets are distributed according to your wishes after your passing or in the event that you become incapable of managing your affairs. Although they serve a similar purpose, wills and trusts are very different options, each granting a unique set of advantages. In general, wills are less expensive and better suited to smaller estates, while trusts are ideal for large estates with numerous types of assets.
A will is essentially a set of instructions for the distribution of your assets after your passing. Living wills can stipulate exactly where things such as real estate, bank accounts, vehicles and jewelry end up. Individuals have the right to specify any disposition of their assets that they desire, so long as the writer was in a sound state of mind at the time of writing. Although wills specify which assets go where, these documents can still be subject to probate courts' apportionment of assets to pay off creditors and other obligations.
Rather than basing asset distribution on written instructions, trusts place assets in the hands of an active trust manager. This individual is tasked with personally making decisions regarding the assets on deposit according to the general wishes of the funder of the trust. Trust managers can distribute any assets that have been funded to the trust in the event of incapacitation or death of the depositor in any way.
Wills can be much less expensive to create than trust accounts, since wills require only a formal document rather than active management. Living wills can be made without professional assistance in many instances, making them ideal for smaller estates and individuals with simple asset distribution wishes and no large outstanding debts or obligations.
One of the largest advantages of trusts is that they do not go through the probate process. This allows your assets to stay out of the hands of the court, instead relying on a trusted individual to carry out your wishes for your property. Trust distributions can also be set for specific future periods, such as when a child turns 21 or gets married. Trust managers can also be instructed to invest trust funds rather than distributing the funds, allowing family members to receive interest and capital gains over a long term rather than a lump-sum all at once.