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What happens to your money after you die? For many families, the answer is a time-consuming, emotional, public, and often complicated legal process called probate.

Ultimately, estate planning isn’t just about money; it’s about reducing stress during an already difficult time. In fact, among Baby Boomers, the top motivations for creating a will or trust were peace of mind, protecting loved ones, and avoiding probate.

In this episode of Money Wisdom, Nicholas J. Colantuono, CFP® and Eric Hogarth, CFP® break down the differences between a will and a trust and their role in the probate process.

What Is Probate?

When you die, your loved ones may face financial and legal responsibilities as your estate goes through probate. This court-supervised legal process confirms your will and oversees the distribution of your estate according to your wishes. Probate can take several months or longer and may involve legal fees.

Many people dismiss estate planning because they assume it’s only for the wealthy. But making your wishes known can help save your family from confusion and uncertainty down the road.

What Is a Will?

A will is a legal document that outlines where your money goes when you die. But without clearly naming beneficiaries, the probate court will make those decisions on your behalf.

Even though it will likely go through probate, a well-written will provides clear instructions to the court on how you wanted your affairs handled. This process does, however, become public record. That’s why it’s important to ensure you’ve clearly communicated your wishes with those involved.

What Is a Trust?

A trust is a legal arrangement where one person holds and manages assets for another. You may consider this legal tool if your financial circumstances are more complex. For instance, if you have rental properties in different states, a trust can better serve your needs than a will alone.

With a trust, you can control how often, under what circumstances, and to what extent your heirs inherit your assets. Several different types of trusts exist, each with its own purpose. Two of the most common used in estate planning are revocable and irrevocable trusts.

Which Type of Trust Do You Need?

With a revocable trust, you retain complete control over your assets during your lifetime. You can amend, modify, or terminate the trust at any time. Upon your death, the assets pass directly to your beneficiaries without going through the probate process. However, because you maintain control, creditors can still reach these assets.

On the other hand, an irrevocable trust needs court approval or the beneficiaries’ consent to make any changes. But because you give up control and ownership of the assets, they are removed from your taxable estate and shielded from creditors. Like revocable trusts, the assets held inside bypass probate.

With the right estate planning tool, you can help ensure your wishes are honored while making the process easier for the people you care about most.

Ready to outline your wishes with an estate plan? Get your free copy of The Greatest Gift guide by texting “GIFT” to 800-757-0436.