What is the Difference Between a Will and a Trust?
A will and a revocable trust are both legal documents used in estate planning, but they serve different purposes and have distinct characteristics. Here are the key differences between a will and a revocable trust:
Distribution of Assets:
Will: A will is a document that outlines how a person's assets will be distributed after their death. It specifies who will receive the assets, how much they will receive, and any specific conditions or instructions.
Trust: A trust is a legal entity that holds assets for the benefit of designated beneficiaries. The trust document specifies how the assets should be managed and distributed during the settlor's lifetime and after their death. A trust can provide more flexibility and control over the distribution of assets than a will.
Probate Process:
Will: A will generally goes through the probate process, which is a court-supervised procedure to validate the will, pay outstanding debts and taxes, and distribute the assets to the beneficiaries. Probate proceedings are a matter of public record and can be time-consuming and costly.
Trust: Assets held in a trust can bypass the probate process. Upon the death of the settlor, the assets in the trust can be distributed according to the trust's instructions without court involvement. This can save time, maintain privacy, and potentially reduce expenses associated with probate.
Management of Assets:
Will: A will does not take effect until the death of the testator (the person making the will). It does not provide for the management of assets during the testator's lifetime or in the event of incapacity.
Trust: A trust can be created to hold and manage assets during the settlor's lifetime, including in situations of incapacity. It allows for a smooth transition of asset management if the settlor becomes unable to handle their affairs. The trust document appoints a trustee who manages the assets according to the terms of the trust.
Privacy:
Will: Wills are typically subject to public probate proceedings, meaning the contents of the will and the distribution of assets become part of the public record.
Trust: Trusts can offer greater privacy because they generally avoid probate. The details of the trust's provisions and the distribution of assets can remain confidential.
Flexibility and Control:
Will: A will allows the testator to name guardians for minor children, appoint an executor to administer the estate, and specify the distribution of assets. However, the terms of a will are subject to probate court approval and may be subject to challenge or contest.
Trust: Trusts provide more flexibility and control over asset management and distribution. The settlor can specify detailed instructions, establish conditions for distribution, create provisions for ongoing care or support, and even plan for charitable giving.
It's important to consult with an experienced estate planning attorney to determine which instrument, or a combination of both, is appropriate for your specific circumstances. They can guide you through the process, help you understand the legal implications, and create an estate plan that aligns with your goals and wishes.