When it comes to planning for the future, few topics are more important—or more misunderstood—than estate planning. Two of the most common tools used to pass on assets are wills and trusts, but many people aren’t sure how they differ or which one best fits their needs. While both serve the essential function of transferring property after death, they do so in very different ways — each with its own set of advantages, limitations, and legal implications. Whether you’re just starting to think about your legacy or updating an existing plan, understanding the distinctions between a will and a trust is the first step toward making informed, confident decisions for you and your loved ones.
The Benefits of Using a Will as Your Estate Plan
Wills are as simple as they come in the realm of estate planning. When someone writes a will, they are simply stating that when they die, they want their assets to go to a specific person or organization. They also name an executor, which is the title given to the individual who is in charge of handling your estate and final affairs upon your passing. This document is completely revocable during your lifetime; you can tear it up and start over or amend it at any time. The major advantage of a will is the cost effectiveness during your lifetime and the fact that there is nothing for you to do after its creation.
The Drawbacks of Using a Will as Your Estate Plan
Wills, however, do have one significant drawback that lead many people to opt for a type of trust instead; that drawback is called probate. Even when you have a will, a formal court process called probate needs to take place. Many people have heard or experienced horror stories with a probate, and unfortunately, there is no way to avoid that process with a will. Simply put, probate is the legal process of taking assets, property, and anything else owned in the sole name of the deceased person and transferring it to the decedent’s beneficiaries. In a perfect situation, a full probate will only take a minimum of 6 months to complete. While you wait for the probate process to end, beneficiaries will not have any access to any assets left to them. Furthermore, the cost of probate often times far exceeds the cost of doing a trust.
Creating a Revocable Living Trust
This section of the blog will certainly show my bias in estate planning vehicles and which vehicle I often try to steer people towards. When I speak to clients about revocable living trusts, I simply refer to a trust as the “semantics of titling.” What exactly do I mean by that? I mean that rather than you as an individual owning titled assets (homes, bank accounts, deferred tax accounts, etc.), you will instead own these assets as the Trustee of your own revocable living trust. Without getting too into the weeds with estate planning lingo, I will try to explain that a little more clearly.
If you watch the news, you may have seen the term used for monopoly law referred to as “antitrust law.” The term originates from the early days of our country. Before America had formalized business law, everything was owned in trust. Why would that be? Because a trust operates similar to a business, in the fact that a trust never dies. If this trust never dies, you would be correct in jumping to the logical conclusion that there is no need for the probate process that takes place with a will. Instead, during your lifetime, there is effectively no difference between you as an individual and you as Trustee of your revocable living trust, aside from how things are titled. For example, say you own a home here in Franklin, Tennessee. You’ll have a deed saying something to the effect of “John Doe and Jane Doe as tenants by the entirety.” John Doe and Jane Doe are listed in this deed as individuals. With a revocable living trust, our firm will create and record a new deed with the Williamson County Register of Deeds, which will say something to the effect of “John Doe and Jane Doe, Trustees of the Doe Family Revocable Living Trust.” It really is that simple. Assets are being taken out of your name as an individual and are being shifted to you as the trustee of your trust.
Are There Drawbacks to Using a Revocable Living Trust?
Now, the major drawback of a Revocable Living Trust is going to be the effort that it takes during your lifetime. While we handle the deeds for property, it is up to you to handle bank accounts and other financial assets, since financial institutions will only speak to the account owner, and not an attorney. This little bit of homework looks like going to your banks to change the title or the beneficiary on those accounts, whichever your attorney advises you to do. Additionally, if you sell a home and buy a new one, you must make sure you purchase the real estate through the trust with the same trust titling as above.
How Do I Know Which Estate Plan is Right for Me?
At the end of the day, everyone needs an estate plan in place to ensure their legacy and wishes are protected. Whether you want to keep your estate planning process simple with a will, or you desire a probate-avoidant plan like a revocable living trust, our team would be honored to assist you with creating a plan tailored to your situation. To schedule a free consultation with a Franklin estate planning attorney, please call 615-996-1400 or fill out our contact form and a member of our team will reach out soon.