It’s not a stretch to say that given an chance, most people won’t be able to describe the difference between a Will and a Trust. Both are potentially beneficial planning devices and serve distinctly helpful purposes for an estate. And both Wills and Trusts are common approaches to end of life planning. So what is the difference? Which is better for you when thinking about protecting your family?
Wills, Protection After Death
A Will serves as a public document that declares, in an official manner, how your estate will be passed on to whomever you desire. An executor, or personal representative is usually designated as someone to manage the process of probate, which can be cumbersome and often ends up involving attorneys for assistance.
Trust, Protection Before Death
A Trust, or Living Trust, as opposed to a Will provides for a transfer of your estate prior to your death (into the trust). A very important benefit of this process is that you can utilize a trust to avoid probate. You can also utilize a trust to pass property to children although the property must be managed by a trustee until they reach the age of 18. Additionally a trust, unlike a Will, does not become a public document and many people like the privacy it affords.
One of the biggest benefits of a Living Trust is that, well managed, it is updated throughout your life. Because of this, it can be a god-send to family and friends in the case of your incapacitation. Whereas, without a trust, concerned family might have to go through a public court process to gain the authority to manage your finances and affairs, if you become physically or mentally unable to – with a trust, this process is kept private and a pre-determined protocol for taking charge of the trust is carried out. If a living trust is skillfully setup, you and/or your estate should not be in limbo as a result of inability by you or your spouse to manage it properly when it would otherwise not be possible.
Does a Trust Help Me Avoid Probate?
Yes, we covered this a little bit here, and more in depth in our article, The Basics of Probate. If your loved ones who are left behind cannot afford a lengthy and drawn out procedure after your passing, then you may want to avoid probate at all costs.
A living trust is your best option in this regard as it does not pass through probate whereas a will does.
Probate: Living Trust vs Will
Probate is a court process that is put in place to wrap up a deceased person’s affairs once their debts are settled. It can take time, it can be contentious, and it certainly can feel unnecessary for many estates.
As property that passes through a Trust it does not have to go through probate, it may be allocated to beneficiaries without any interference by a court (or family) or any attorney’s fees charged.
Summary of the Key Differences Between a Trust and a Will
A Will is also referred to as your Last Will & Testament. It is where you get to specify your last wishes for your estate and appoint someone to carry them out. Your assets will be transferred to your beneficiaries after your death and after probate. You can name your guardians for minor children.
Your Living Trust, also termed as “Inter Vivos” trust, is where you specify your wishes in the case that you are incapacitated. A successor trustee is appointed to carry out the trust on your behalf. Your assets are to be transferred to the trust while you’re alive so it can be passed onto your beneficiaries when you’re gone. You will also name a guardian to take care of minor children. With a living trust, you can avoid probate.
Can it be a Both-And Situation?
You bet! If you want to know more about how a Trust and a Will might work together to be an even more comprehensive approach to planning your estate, we will help you make sense of it all. Please contact-us and we’ll schedule a time to discuss your estate-planning options.