Wills and Trusts: Confused about the differences between a will and a trust? If so, you are not alone. Often people who don’t understand use the terms interchangeably. But be clear, a will is not a trust. Having a basic understanding of these two important documents is essential.
What a Revocable Living Trust Can Do.
- Avoid conservatorship and guardianship. A revocable living trust allows you to name your spouse, partner, child, or other trusted person to manage your money and property, that has been properly transferred to the trust, should you become unable to manage your own affairs. A will only becomes effective when you die, so a will is useless in avoiding conservatorship and guardianship proceedings during your lifetime.
- Generally can avoid probate. So long as your trust property (accounts, real estate, tangible property (e.g., jewelry, artwork, household contents), and intangible assets (e.g., copyrights, trademarks, patents) is properly titled in the name of the trust, your assets can avoid probate. Accounts and property that pass using a will must be probated. Depending on the size and complexity of the estate, that can take years.
- Maintain privacy after death. A will is a public document; a trust is not. Anyone, including nosy neighbors, predators, creditors, and the unscrupulous can discover what you own at the time of your death. They can also potentially discover who your beneficiaries are. A trust allows you to maintain your privacy after you pass.
- Protect you from court challenges. Although court challenges to wills and trusts occur, attacking a trust is generally much harder than attacking a will because trust provisions are not made public.
What a Will Can Do.
- Name guardians for minor child. A will – not a living trust – can be used to name guardians to care for a minor child. Depending on the state law, there may be an additional writing that can be used to name a guardian; however, a revocable trust is not that document. That said, in your trust you can provide the resources that the guardian will need. In many instances, the trustee and executor of the will are one and the same.
- Specify an executor or personal representative. A will allows you to name an executor or personal representative – someone who will take responsibility to wrap up your affairs after you die. This typically involves working with the probate court, gathering and protecting your accounts and property not owned by a trust, paying your debts, and giving what remains to your named beneficiaries. But, if there are no accounts or property in your individual name (because you have a fully funded revocable trust), this feature is not necessarily useful.
What Both a Will & Trust Can Do:
- Allow revisions to your document. Both a will and revocable living trust can be revised whenever your intentions or circumstances change so long as you have the mental ability to understand the changes you are making.
WARNING: There is such a thing as irrevocable trusts, which cannot be changed without legal action. This is outside the scope of this discussion.
- Name beneficiaries. Both a will and trust are vehicles which allow you to name who you want to receive your accounts and property.
- A will simply describes the accounts and property and states who gets what. Only accounts and property in your individual name will be controlled by a will. If an account or piece of property has a beneficiary, pay-on-death, or transfer-on-death designation, this will trump whatever is listed in your will.
- While a trust acts in the same way, there is an added step. That additional step is called the transfer or the assignment of assets into the trust. That is known as “funding,” the trust. This is where the assets must be properly titled in the name of the trust, not in the individual’s name. Any asset not in the name of the trust at the time f death must be handled through probate.
- Provide asset protection. A trust, and less commonly, a will, may make it difficult for creditors to reach the beneficiary’s assets. This can be important especially if the beneficiary is not good at managing money. If the assets are in the name of the trust and not the individual, it would make it hard for predators and creditors to reach the assets. The list could include divorcing spouses, car accident litigants, bankruptcy trustees, and business failures.
While some of the differences between a will and trust are subtle; others are not. Together, we will take a look at your goals as well as your financial and family situation to design an estate plan personalized to your needs. Call me, Francine D. Ward, today to schedule your in-person or virtual consultation.
Francine D. Ward
Attorney-at-Law, Author, Speaker
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