Everyone will have come across the terms ‘will’ and ‘trust fund’ but if asked, would you be able to explain the difference between the two? Whilst you may think they’re largely the same, they actually have two very different purposes. A will comes into effect only when you’ve died, whereas a trust fund takes effect as soon as it’s created. In this article we examine:
- What is a will
- How a trust fund is defined
- Pros and cons of will and trust funds
- Online will writing services
What is a will?
A will is a legal document which confirms who is entitled to your property and finances after you die and has no power whilst you’re still alive or if you become incapacitated. You are able to choose who will be responsible for distributing your assets, and any conditions you would like to include. You are in control of who gets your estate, as well as being able to leave donations to charity and even keep your beloved pets safe.
How is a trust fund defined?
A trust is very different, and can be used to distribute property and wealth before death or afterwards, and whilst you may consider them to be only for the wealthy this is actually not the case.
A trust is a legal arrangement where one person the “trustee” holds legal title to property for another person known as the “beneficiary”. There are usually two types of beneficiaries, one set that receives income from the trust during their lives and then another which receives what is left over after the first set of beneficiaries dies. Whereas a will covers any property that is ONLY in your name (and not jointly held or in a trust), a trust covers only property that has been transferred into the trust.
Questions on trust funds and wills
The primary difference of trust fund compared to a will is that a court does have to oversee the process with a trust. This can save time and money, however there is also the aspect of privacy. While a will become part of the public records, a trust can stay private. There are benefits and drawbacks to both trusts and wills.
A trust is a certain type of agreement which allows a trustee, the third party, to hold on to assets on behalf of a beneficiary or group of beneficiaries. Since the processes related to trust remain outside the jurisdiction of the courts, beneficiaries may gain access to said assets more quickly than they may be able to if these are transferred instead with a will.
Trust funds pay out via the income that they generate in the form of interest paid on the principal. Trusts can not hold on to the income earned by the principal asset, but may instead distribute those earnings to the beneficiaries.
Pros and cons of wills and trust funds
They both have their advantages and disadvantages, for example, in your will, you are able to specify your funeral arrangements and name a guardian for your children, whereas in a trust this is not possible. A trust does not have to pass through probate, unlike a will which can save both time and money.
It can all feel very confusing and overwhelming which is why it’s best to speak to an expert like Beyond who can guide you every step of the way. Making a will is easier than you may think, and you can even do it online! As long as your will is not too complex, you don’t necessarily need the advice (or expense) of a solicitor, and your will can be done and dusted in as little as ten minutes.
Take a look at this interesting infographic about comparing attitudes to wills from Beyond Life.
Online will writing services
Online will writing services enable you to pass on your property, land, specific belongings, stocks and shares, and money. In the event that you die without a will (known as dying intestate) the bulk of your wealth will go to the person who is legally considered to be your closest family member, such as a spouse, civil partner or in the case that you are unmarried, a child. Making a will ensures that your partner will be protected even if you are not married, meaning specific items of both sentimental and financial value, and your pets, will go to the right people.
It’s not the most glamorous topic to have to think about or face, but it’s better to be safe than sorry. Protect your family and your assets now so you don’t have to worry about it later.