Key Takeaways:
- Wills cover both assets and non-financial matters for your estate. Trusts manage all property and asset management at the time of a person’s death.
- Wills are easier to contest because they are written at a certain period and can be considered outdated. Living trusts are updated each time a new asset is obtained.
- Trusts often supersede wills because they fall under contract law.
Wills vs. Trusts – Which is best for your estate plan?
Many clients ask if it is better to have a will or a trust. Although the final decision often depends on factors unique to your estate and jurisdiction, the following guide will help you decide if a will or trust is best for your estate plan.
A will is a written document that allows the passing of assets at the time of a person’s death, naming guardians and conservators for minor children, and can address your final wishes outside of a financial context.
A living trust is a fiduciary arrangement leveraged to manage all property transferred to the trust during your lifetime, including during any period of incapacity, as well as manage or distribute assets following your death. A trust only includes assets that are specifically named and formally transferred to the trust in writing. While it is possible to attempt to document all possessions and transfer them, this is a time-consuming and complex process that must be repeated whenever a new possession is acquired.
While a living trust and a will accomplish similar objectives, there are several differences to consider.
Probate: Wills are subject to the probate process, including filing fees, court costs, and asset fees for every asset subject to probate. Trusts are not subject to probate proceedings. Your successor trustee simply transfers assets pursuant to your detailed trust agreement.
Incapacity: With a will, a court appoints a conservator or guardian of the estate during periods of incapacity. A living trust prevents court control of assets, whereas the individual or corporate trustee you select manages your financial affairs for your benefit / on your behalf.
Creditor Protection: Creditors have a right to make claims against your estate during the probate proceedings. Conversely, you can include spendthrift provisions in your living trust to protect beneficiaries from creditors.
Real Property: Ancillary estate administration must be done in every county where you own real estate. With a trust, no ancillary administration is required for real estate titled in your trust.
Contestability: Trusts fall under contract law, which is held to a stricter standard than testamentary law applicable to wills. Therefore, a living trust generally supersedes a will.
Additionally, living trusts are effective once signed and funded, and can be updated during your lifetime. Wills are drafted at a point in time and only go into effect upon death, causing living trusts to take precedence due to their ongoing nature. This means wills are more likely to be successfully challenged because it can be argued the will is outdated or was made at a time when the individual was not of sound mind or was under the influence of someone else.
After careful consideration, you will likely determine that establishing both a will and trust is important to achieve your desired outcomes. Working with a dependable and experienced financial advisor can help you select the type of trust that best align with your financial plans and goals for the future.
Contact a Comerica Trust professional to get started on your estate planning journey.
Want to hear more about topics like this from Comerica? Subscribe today.
NOTE: IMPORTANT INFORMATION
Comerica Trust is a unit of Comerica Wealth Management which consists of various divisions and affiliates of Comerica Incorporated, including Comerica Bank, Comerica Bank & Trust, N.A. and Comerica Insurance Services, Inc. and its affiliated insurance agencies. Strategic alliance organizations of Comerica Bank & Trust, N.A. are neither subsidiaries nor affiliates of Comerica Incorporated or Comerica Bank & Trust, N.A. Securities and other non-deposit investment products are not insured by the FDIC; are not deposits or other obligations of or guaranteed by Comerica Bank or any of its affiliates; and are subject to investment risks, including possible loss of principal invested. Comerica and its affiliates do not provide tax or legal advice. Please consult with your tax and legal advisors regarding your specific situation.
This is not a complete analysis of every material fact regarding any company, industry or security. The information and materials herein have been obtained from sources we consider to be reliable, but Comerica Wealth Management does not warrant, or guarantee, its completeness or accuracy. Materials prepared by Comerica Wealth Management personnel are based on public information. Facts and views presented in this material have not been reviewed by, and may not reflect information known to, professionals in other business areas of Comerica Wealth Management, including investment banking personnel.
The views expressed are those of the author at the time of writing and are subject to change without notice. We do not assume any liability for losses that may result from the reliance by any person upon any such information or opinions. This material has been distributed for general educational/informational purposes only and should not be considered as investment advice or a recommendation for any particular security, strategy or investment product, or as personalized investment advice.
