The Difference Between a Will and a Trust

Will or Trust: Which Is Better for Me?

Wills and trusts are both beneficial, and neither is better than the other. Whether you need one or both depends on your financial and family needs.

Many think wills and trusts are only necessary for wealthy people. This isn’t the case.

Everyone has an estate. Whether you have an estate valued under $100,000 or over $10,000,000, wills and trusts can make things easier for your surviving loved ones when you die.

A will may be all you need if you have a simple estate. A will can take care of guardianship for minor children, name a caretaker for your pets, state who you wish to receive what, and instruct how you want any debt handled.

A trust is better if you have complicated family circumstances to handle. There are many different types of trusts, such as a special needs trusts, spendthrift trusts, and life insurance trusts. Each is beneficial for a particular situation.

If you have a complex estate, a trust may be necessary. A trust can manage multiple properties and businesses, reduce estate taxes, and leave specific asset distribution instructions, such as limiting when and how much money your children can access.

Have a blended family? Learn what to remember when making estate and financial plans: Estate Planning for Your Blended Family.

Trust vs Will

Want to leave money and property to specific individuals? Use a will.
Want to name guardians for your minor children? Use a will.
Have special needs children you need to plan for? Use a trust.
Have multiple properties? Use a trust.
Do you want to limit how your beneficiaries use the money and property you leave to them? Use a trust.
Want to lower your estate taxes? Use a trust.

Many people would benefit from having both a will and a trust since they can accomplish different things.

How Life Insurance Works with Wills and Trusts

Life insurance, wills, and trusts are all vital to estate planning.

Life insurance pays a death benefit when you die to the beneficiaries you name on the policy. This payout comes from the insurance company.
Wills leave assets to beneficiaries you name in the will. You own the assets listed in your will.
Trusts leave assets to beneficiaries named in the trust. Assets from a will can be transferred into a trust upon your death. Life insurance death benefits can also be paid to a trust.

Life insurance is often used in conjunction with a trust. You can create an irrevocable life insurance trust (ILIT) to protect assets and get tax benefits.

With an ILIT, you name the trust, owner, and life insurance policy beneficiary. It can own either term or permanent life insurance. An ILIT can reduce your taxable estate, provide liquidity to beneficiaries to pay taxes and other expenses or debts, avoid gift taxes, protect government benefits for loved ones receiving aid, and help with legacy planning.

Learn more about how life insurance can be used with trusts in our guide: Life Insurance in Estate Planning.

Wills, trusts, and life insurance policies should be reviewed throughout your life to ensure they align with your needs and wishes. Life brings many changes, which may call for beneficiary changes.

Because of the tax implications with trusts, hiring an estate planning attorney is advisable. Wills are more simple, and many people are comfortable creating one themselves.

Looking to get life insurance to protect your loved ones? We can help. Learn more about life insurance and get an instant online term life insurance quote here: a guide to term life insurance.