Wills and trusts can both be used for estate-planning. However, there are some key differences between the two. The key difference is that wills become effective immediately after the death of the owner, but trusts become effective when a given asset is transferred to the trustee.
Wills are legal documents that state the manner in which a person’s assets are distributed. It is meant to express the last wishes of a person. The owner of the will can change it any time before he or she dies, of course, and as long as they are of sound mind. Wills are public, they are taken to probate court, and they cover all of the asset of the owner.
Trusts are private documents that have several advantages, including savings on taxes and planning for disability. While wills cover all of the owner’s assets, a trust only a certain asset is transferred with a trust. A trust’s costs more than a will, but you avoid probate expenses after you die, therefore potentially saving you a significant amount money. It’s important to understand the difference between the two, but it’s more important that you get your assets organized because you never know when you could die.