Wills vs. Trusts: Understanding Your Estate Planning Options

When it comes to estate planning, one of the most common questions we hear is, “What is the difference between a Will and a Trust?” It is a great question and one that deserves a thorough explanation.

After all, these two estate planning documents serve very different purposes, and understanding their nuances is crucial for ensuring your wishes are carried out the way you intend.

What is a Will?

A Will is a legal document that outlines how you want your assets and property distributed after you pass away. Think of it as a set of instructions for what should happen to your belongings when you are gone.

In New Jersey, a will must go through the probate process, which is a court-supervised procedure for authenticating the Will and overseeing the distribution of your assets. During probate, the court appoints an executor (someone you name in your will) to carry out your wishes as outlined in the document.

One of the key components of creating a Will is naming guardians for any minor children you have. This ensures your kids are cared for by the people you want, should something happen to you. You can also use a will to leave specific assets or property to designated beneficiaries, whether that is family members, friends, or even charitable organizations.

Advantages of Having a Will

• It ensures your assets are distributed according to your wishes rather than leaving it up to New Jersey’s intestacy laws (which dictate how property is divided if you do not have a will).
• You can name an executor of your choosing to oversee the probate process.
• It allows you to appoint guardians for your minor children.

Disadvantages of Only Having a Will

• All of your assets have to go through the probate process, which can be time-consuming and public (since probate records are open to anyone).
• Your assets may be tied up in probate for months or even years, leaving your loved ones waiting to receive their inheritance.

What is a Trust?

A Trust, on the other hand, is a legal arrangement where you transfer ownership of your assets to a third party (called a trustee) to manage and distribute them according to your wishes. There are different types of trusts, but the one most relevant for estate planning purposes is a revocable living trust.

With a revocable living trust, you maintain control over the assets in the trust while you are still alive. You can move assets in and out, change the terms, or even dissolve the trust entirely. Upon your passing, the trust then becomes irrevocable, and the trustee you have appointed takes over the management and distribution of the trust assets to your named beneficiaries.

One of the biggest advantages of a revocable living trust is that it allows your assets to be distributed outside of probate. This means your loved ones can receive their inheritance much faster without having to go through the lengthy and public probate process.

Advantages of a Trust

• Avoids the probate process, allowing for a faster distribution of assets
• Provides privacy since trust records are not made public like a Will
• Offers ongoing management of assets, good for special needs beneficiaries
• Can help minimize estate taxes

Disadvantages of a Trust

• Requires upfront costs to establish the trust
• Involves ongoing administrative fees and maintenance
• Assets have to be properly transferred into the trust while you are alive
• Lose control of your assets if placed in an irrevocable trust.

Wills vs. Trusts: Key Differences

By now, you are probably starting to see some of the key distinctions between Wills and Trusts. Here is a quick rundown of the major differences:

• Revocability: Wills are easily revocable and can be changed any time. With a revocable trust, you can modify it while alive, but it becomes irrevocable at death unless originally created as an irrevocable trust.
• When they take effect: A Will only goes into effect after you die, whereas a revocable Trust is effective as soon as you transfer assets into it.
• Probate: Wills require the probate process, which means court involvement. Trusts allow assets to be distributed outside of probate.
• Privacy: A will becomes part of public probate records, while the details of a trust can remain private.
• Asset management: With a will, assets are distributed outright to beneficiaries. A Trust allows for ongoing management of assets over time.

Using a Will and Trust Together

For many people, the ideal estate plan involves having both a will and a revocable living trust. Used together, they cover all your bases and provide a robust framework for ensuring your loved ones are taken care of after you are gone.

A common strategy is to have what is called a “pour-over will.” This type of will essentially acts as a safety net, allowing any assets you have not transferred to your revocable trust during your lifetime to be “poured over” into the trust after your death. From there, those remaining assets are distributed according to the terms you have outlined in your trust agreement.

You can also use a will to establish a testamentary trust, which is a trust that is created and funded through the provisions in your will after you die. This can be useful for accomplishing certain goals like minimizing estate taxes or providing for a child with special needs.

The key takeaway? Wills and trusts each serve important – but distinct – purposes in an estate plan. Having both gives you maximum flexibility and control over what happens to your assets.

Factors to Consider When Choosing a Will vs. Trust

Admittedly, deciding whether you need just a will, just a trust, or a combination of the two can get complicated quickly. That is why it is so important to work with an experienced estate planning attorney who can evaluate your unique situation and make tailored recommendations.

Some key factors that will come into play:

• The size and complexity of your estate
• Your specific goals (e.g. asset protection, tax planning, providing for special needs beneficiaries)
• Your family situation (spouse, children, grandchildren, etc.)
• The need for ongoing asset management or distribution over time

For example, if you have a relatively small estate and straightforward preferences for distributing your assets outright, a simple will may suffice. But if you have a larger estate, investment accounts, real estate holdings, and a desire to exert more control over how/when your assets get distributed, a revocable living trust would likely make more sense as the core of your plan.

Working with an Estate Planning Attorney in New Jersey

At the end of the day, there is no “one-size-fits-all” solution when it comes to estate planning. That is why it is so crucial to work with an experienced estate planning attorney who can take the time to understand your unique goals, circumstances, and priorities.

When you work with us, we will take a comprehensive look at your current situation – your assets, your family dynamics, your future hopes and plans. From there, we can make tailored recommendations on whether a will, trust, or combination of the two best aligns with your needs and wishes.

If a revocable living trust makes the most sense, we will guide you through properly establishing and funding the trust so it is carried out exactly as you intend. We can help you navigate the complexities of designating trustees, beneficiaries, and distribution terms.

And if a standard will fits the bill, you can count on us to ensure it is drafted with airtight language, properly executed according to New Jersey state laws, and integrated seamlessly with the rest of your estate plan.

We understand that estate planning can feel overwhelming, which is why we make it a priority to explain every document and decision in plain English, not legalese. Our goal is to give you the clarity and confidence you need to make the most informed choices for protecting your legacy.

Contact The Simone Law Firm For Comprehensive Estate Planning

If you are ready to get started on an estate plan that truly reflects your values, safeguards your assets, and provides for your loved ones, it is time to talk to The Simone Law Firm. We have been trusted by generations of New Jersey families to adeptly navigate this complex area of the law, and we are ready to put decades of experience and insight to work for you.

We know weighing your options between wills and trusts can feel daunting. But with our comprehensive guidance from Day 1, you can feel confident you are making all the right moves for your unique estate planning goals. Do not leave the future of your legacy to chance – contact us today to schedule a consultation and start putting a rock-solid estate plan in place.