The Difference between a Will and a Trust
Black and Davison
If you’ve decided that it’s time to put an effective estate plan in place, to properly prepare for the orderly distribution of your assets in the event of your death, you’ve likely seen or heard references to the use of certain dispositive instruments—wills and trusts. But you may not have a clear understanding of the difference between the two estate planning tools and which might be best for your situation.
What Is a Will?
Also known as a “last will and testament,” this document includes specific instructions with respect to the distribution of your assets, as well as your debts. It’s also customary to include designation of a guardian for any minor children in your will. However, your will only goes into effect in the event of your death. Your will cannot be used to transfer property or institute any other legal action during your lifetime.
If you use a will to convey the property in your estate, it may be subject to probate. Your heirs may choose not to take your will through the probate courts, but any interested party always has the right to seek the authority of the probate court to settle your estate.
The preparation and execution of a will is typically a much simpler process than a trust, so there’s usually less expense upfront. However, because of the probate requirement, your heirs can end up paying more after your death.
What Is a Trust?
In essence, a trust is a separate legal entity that can hold property. The trust is created by a trust document, and names a trustee. Because the trust is a separate legal entity, you no longer own any property that you transfer to the trust. Because the probate process is set up to resolve the transfer of your property, and because you no longer own property placed in trust, any property placed in trust avoids the probate process.
A trust can be “inter vivos” or testamentary. An inter vivos trust goes into effect during your lifetime, allowing you to transfer assets before your death. A testamentary trust is created upon your death, with assets typically transferred to the trust by your will.
The preparation and execution of a trust is a far more complex process than the preparation of a will. Accordingly, there’s typically more upfront expense involved. However, because property transferred into a trust escapes probate, there’s less expense to your heirs after your death.