What is The Difference Between a Will and a Trust?
The terms “will” and “trust” are commonly used in the context of estate planning, but not everyone understands the differences between the two. Both are effective tools that can be used separately, or they can be used together to develop a more comprehensive estate plan that will be in keeping with your final wishes.
Will: Definition
A will refers to the wish of a person, as the name suggests. In legalese, will refers to a document that expresses the last desires of an individual. The person who developed the will is called a testator. The testator can appoint an executor who supervises the transfer of their estate to the legal heir(s).
After the death of the testator, the will goes through probate, which is a process whereby the court assures that the last desires of the will-maker are carried out appropriately. Also, it may contain instructions or directions on the use of the testator’s assets after their death.
A will only goes into effect after the testator’s death. The testator has the right to alter or revoke the will at any time prior to death as long as they are of sound mind. If an individual has created numerous wills for the distribution of their property, then their most recently created “last will and testament” is the one that will be honored – as long as it is legally valid.
Trust: Definition
A trust refers to a legal arrangement wherein the trust owner authorizes an individual, known as a trustee, to hold the asset for the benefit of a third party known as the beneficiary. A trust enables an individual to nominate his/her assets’ beneficiaries before or after their death. The document which lays out the terms of the trust is called the trust deed, and the subject matter is referred to as trust property.
A trust does not go through probate, which means that there is no court process involved, and the assets within it can be transferred more smoothly to the designated beneficiaries. The reduction of estate taxes is another reason for creating certain types of trusts.
Trusts can be categorized into two classes. The first type of trust is a revocable trust, which can be terminated or modified at any time during the trust owner’s lifetime. The second type is an irrevocable trust, which cannot be changed or canceled once it is set up.
Primary Differences between a Will and Trust
The main distinctions between wills and trusts are as follows:
Definition
A Will is a declaration on the management and distribution of the assets of the testator after their death. On the other hand, a Trust is a legal arrangement in which the settler authorizes an individual as a trustee to hold the asset on the beneficiary’s behalf.
Assets
A will can address the distribution of all of testator’s assets (along with non-financial issues such as guardianship of minor children), while a trust only deals with the specific assets that are transferred into it.
Becomes Effective
A will only becomes effective after the testator passes away, whereas a trust becomes effective as soon as it is set up and the designated assets are transferred into it.
Probate Process
As we talked about earlier, a will goes through the probate process, which is overseen by the court. A trust, on the other hand, does not have to go through probate.
Revocation
It is possible to revoke a will at any time before the testator’s demise. However, the revocation of a trust depends on the type of trust – a revocable trust can be revoked at any time during the life of the creator, while an irrevocable trust cannot be revoked once it comes into effect.
Public vs. Private Document
After the testator’s death, a will becomes part of the public court record. Trusts, on the other hand, are private and cannot be accessed by the general public.
Wills and Trusts FAQs
Is a Will or a Trust Better?
A trust streamlines the process of estate transfer after you pass away while avoiding a prolonged and potentially expensive period of probate. But if you have minor children, creating a will that establishes a guardian is crucial to protecting both the minors and their inheritance.
Wills and trusts serve different purposes, and one is not necessarily better than the other. Which one you should use will depend on your specific circumstances, and in some cases, estate planning attorneys recommend creating both. A will is usually less costly and easier to set up in comparison to a trust, which is a more complex legal document.
Are Both a Trust and a Will Necessary for You?
Almost everyone should create a will. However, not everyone requires a living or irrevocable trust. In case you have assets and properties to place in a trust and have small children, having both estate-planning instruments might be sensible.
Hire Knowledgeable Trust and Will Lawyers
Trusts and wills are effective instruments that help direct the transfer of assets and property to the next generation. If you would like to learn more about these estate planning vehicles, John H. Ruby & Associates is here to help. To get started, message us online or call our office today at (502) 895-2626 to speak to one of her attorneys.