Will vs. Trust: What's the Difference? & What Do You Need?

Planning for what happens to your loved ones if something happens to you can be overwhelming. As sensitive as the matter can be, division of assets should be done to secure the financial future of those dear to you. This is where you need the help of a Wills and Estates Lawyer to help you with estate planning. The question is: should you opt for a will or do you need to set up a trust?

In this guide, we’ll discuss the essentials of Will vs. Trust. Let’s make sure that you are well-informed about which way of distribution of assets is right for you.

Understanding the Basics of Will vs. Trust for Seamless Estate Planning

Experienced lawyers assist clients in creating wills or trust deeds, helping you prevent your assets from falling into legal issues. Let’s delve into the types of estate planning for a clearer understanding of living trust vs will in Canada.

What Does a Will Entail?

Your Will, also referred to as the last will and testament, is a legal document that expresses your wishes for what you want to happen to your assets (which also includes your property) and minor children after your death.

Living in Canada, you do need to adhere to the provincial laws. Your will won’t affect certain accounts that have beneficiary designations. For example, your will can’t override the beneficiary of an insurance policy. You will need to change the beneficiary if you want someone else to receive that benefit.

When it comes to will vs. trust, it is important to know that the former involves the probate process. It is the legal way to make sure your estate settles its debts before the transfer of ownership. If you pass away without a will, then the division of assets will occur according to provincial laws. Thus, understand probate vs. non-probate assets and ensure that your belongings go to others as per your wishes.

How do you know you need a will?

In a nutshell, everyone needs to have a will, even if they’ve got few assets to their name. However, part of understanding the difference between will and trust is knowing that a will is important for certain people.

Married Individuals: Contrary to popular belief, your spouse does not automatically inherit everything you own. In Canada, you have to specify in your will if you wish that your spouse gets property and other assets.

People with Children: If you have children who are minors according to your provincial laws, you need a will to name a guardian to care for them after your death. Without a will, the courts decide who takes care of them.

People with Property: The state decides who gets your property if you die without a will. Usually, it is your spouse, children, or other relative, or the state can claim it (after paying debts) if there is no one. By creating a will, you get to ensure exactly what happens with your property.

What Does it Mean to Set Up a Trust

A trust is a legal document that designates a reliable third party to allocate your assets to a beneficiary. The third party, i.e. the trustee, has a fiduciary duty to fulfill your wishes. Like an executor of a will, the trustee can be a lawyer or a trusted family/friend. The trustee does not possess the assets; they are merely tasked with managing them.

A key aspect to note in will and trust difference is that the trust does not require a probate process. Make sure that you work with a reliable legal expert in your province to establish a trust. For instance, an experienced law firm serving in Burlington can expertly guide you through estate planning laws in Ontario.

Your trust will detail the assets, officially assign the trustee and beneficiary (there can be more than one). It will also outline the terms detailing when and how of asset distribution.

How do you know you need to set up a trust?

The thing about will vs. trust is that you may not know many people setting up a trust. The fact is that trusts are usually opted by people with a complex estate planning process, with multiple assets. Here is why a trust can become necessary:

High Net Worth: Trusts offer privacy for those with high net worth or complex finances. A specialized lawyer should help you with navigating Ontario real estate law (or whichever provincial laws apply to you), and fulfill legal fees and taxation prior to planning division of assets.

Minor Children/Blended Families: Trusts let parents control how and when assets are shared and help provide for their children. They also help blended families divide assets between a current spouse and children from past marriages.

Special Needs Care: A special needs trust (SNT) helps support a family member with special needs while enabling them to access the government benefits they qualify for.

Key Factors in Will and Trust Difference

Wondering which option from will vs. trust is the smartest legal move to secure the wealth of your loved ones? Here is a brief breakdown of factors that will help you make your decision:

Time of Effect: A will only becomes effective after the asset owner’s death, whereas the trust can take effect immediately or upon disability during the owner’s lifetime.

Flexibility: A will is usually final and difficult to change once executed, while a revocable trust allows ongoing changes and lets a trustee manage asset distribution.

Confidentiality: Your will must go through a public probate court, making it less private, but a trust avoids probate, offering greater privacy and discretion.

Wills and Trusts: What Do You Need?

Now that you know the difference between will and trust, the next step is knowing how to set up each of these. When the time comes and you decide on one (or both!), you will know what to do.

Creating a Will

The best way to set up a will is by meeting with an estate planning lawyer, who draft it with you. Before you set up an appointment, make sure you have a list of every asset you have, the typical essentials including property, vehicles, and valuables like jewelry and art. Your assets also include bank and investment accounts, as well as life insurance and annuities.

Your will details your assets and an executor, who can be a lawyer, friend, or family member. It is important to note that your power of attorney does not immediately become the executor of your will unless you specify.

Once you create a will, you will have to sign it in the presence of your lawyer and impartial witnesses, while ensuring that your will adheres to the specific rules in your province.

Setting up a Trust

Setting up a trust is more complicated and should be done with the help of a skilled trust or estate lawyer. Before you begin, think about what you want the trust to do and make a full list of your assets and property.

Your lawyer will help you choose the right type of trust and write a document that names you as the grantor, names a beneficiary, and appoints a trustee. The document will explain the rules and instructions for the trust and may come with other estate planning papers.

Once everything is ready, you move your money or property into the trust. You may also need to open one or more trust bank accounts.

Bottom Line

Your choice of will vs. trust depends on your unique circumstances, and you can get expert advice to make your decision easier. At Estofa Law, we understand that the decisions regarding inheritance are never easy, and often too emotional and overwhelming.

That is why our reliable lawyers approach every step with care and discretion. With years of experience and a strong track record, we’ve helped countless clients protect the future of their loved ones. Secure your peace of mind today by scheduling a consultation with our skilled lawyer.