Wills and trusts are both valuable tools when planning an estate, but the two terms are commonly confused and misconstrued. Unbeknownst to some, there are many key differences between a will and a trust, especially depending on the time of execution. Before executing a trust and/or a will, a planner should be aware of the individual characteristics of each tool.
A primary difference between a will and a trust is that a will goes into effect only after the author dies, while a trust takes effect as soon as it is executed. A will is a document that appoints a legal representative, usually a close friend or family member, to carry out the deceased’s wishes after that individual’s death. Commonly, wills allocate real property and personal resources among expecting parties according to the author’s detailed instructions. In contrast, a trust can be used as an administrative tool for distributing property any time before an individual’s death, at death, or even afterwards like a will. A trust presents itself more as a legal arrangement through which one party, a “trustee,” holds legal title to property for another person, called a “beneficiary.” Typically, a trust has two common beneficiaries: one set that receives benefits from the trust during their lives and another set that receives those same benefits after the first set of beneficiaries dies.
Additionally, a will typically only includes property that is individually owned and/or property that includes the author’s name in particular, which excludes property held in joint ownership. Wills are specifically designed to allocate all resources owned by the individual because, since a will does not become active until after death, such allocation is necessary for the property’s continuance. A trust includes property that has been specifically transferred to the trust with the explicit intention of transfer to another party. In order for property to be included in a trust, it must be labeled under the trust’s name, which is another technicality that distinguishes trusts from wills.
Arguably the most important difference for clients, wills are required to pass through probate, while trusts have no similar process. Since the author of a will is not alive during its execution, a court generally oversees the administration of the will in question to ensure that the will is valid and not a product of undue influence. In addition to analyzing the contents of the will, a court also oversees the apportioning of the included assets to ensure appropriate distribution. On the contrary, courts do not supervise the execution of a trust, which generally saves the client money, time, and privacy. While probated wills become part of the public record, trusts remain private and mostly off-the-record. Most notably, trusts can be easily changed at any time by the author, which provides flexibility as an individual’s life and priorities change.
Wills and trusts each have their own advantages, disadvantages, and purposes. Wills allow parents to name the desired guardian for their dependents in the case of their untimely deaths. Wills also allow individuals to request specific funeral arrangements and plan for their personal bodily autonomy; trusts do not serve this kind of purpose. However, trusts are commonly used to plan for disabilities or to provide tax savings. Ultimately, it is beneficial for an individual undergoing estate planning to utilize both a trust and a will to adequately account for all personal assets. Many experts recommend executing both tools simultaneously to properly outline personal wishes and designate ownership of key assets. As an individual’s assets grow, it becomes increasingly important to plan one’s estate; retaining an estate planning lawyer, like from Brandy Austin Law Firm, PLLC, could simplify the process.