What is the difference between a trust and a will?
A Will and a Trust are both important estate planning tools, but they differ in several key ways. Below, we outline the main differences between a will and a trust.
Wills
- A Will is a legal document specifying how your assets will be distributed after your death.
- It names an executor who will be responsible for carrying out your wishes.
- A Will also allows you to appoint guardians for any minor children.
- A Will comes into effect only after your death.
- If substantial assets are involved, a Court validation process known as ‘probate’ must take place. Once achieved, this gives comfort to the Land Registry that the executor has authority to sell property and also provides reassurance to banks that the executor can give them a valid receipt for the funds of the deceased they are being asked to release.
- Wills become public documents following the completion of probate.
Trusts
- A Trust is a legal arrangement where you transfer ownership of your assets to a trustee, who manages them for the benefit of named beneficiaries.
- Trusts can be established during your lifetime (Living Trusts) or come into effect after your death (Testamentary Trusts).
- Trusts can provide greater control over how and when your assets are distributed, including setting conditions for beneficiaries.
- Some types of Trusts can offer tax advantages, potentially reducing estate taxes.
- While a Trust offers more privacy than a Will, some information, especially concerning the Trust’s registration with HMRC, may be accessible.
In essence, a Will dictates asset distribution upon death and can be changed, as circumstances change, any time before death providing you remain mentally capable. It is only the last will made that counts. A Trust, on the other hand, can manage assets both during and after your lifetime but once created this may be difficult to change.
Should I have a will and a trust?
- You can have both a will and a trust, and they can complement each other effectively.
- A will is often simpler and less expensive to set up than a trust.
- The best choice for you depends on your individual needs and circumstances.
- It is advisable to consult with a solicitor experienced in estate planning in order to determine the most suitable approach for your specific situation.
In conclusion, both Wills and Trusts are valuable estate planning tools with distinct features. Understanding their differences will empower you to make informed decisions about your assets and ensure your wishes are carried out according to your intentions.