What is the difference between will and trust?
When it comes to estate planning, two of the most commonly used terms are “will” and “trust.” While both are legal documents that help in distributing assets after someone’s death, they serve different purposes and have distinct characteristics. Understanding the difference between a will and a trust is crucial for anyone planning their estate or considering these options for their loved ones.
Will: A Basic Estate Planning Tool
A will is a legal document that outlines how a person’s assets should be distributed after their death. It is created by the testator, who specifies who will receive their property, in what proportions, and under what conditions. A will also designates an executor, who is responsible for ensuring that the testator’s wishes are carried out. However, a will has some limitations.
Firstly, a will only goes into effect after the testator’s death. This means that during their lifetime, the testator has no control over the distribution of their assets. Secondly, the process of probate is required to validate a will. Probate is a court-supervised process that can be time-consuming and expensive, and it becomes public record, which may not be desirable for some individuals.
Trust: A Flexible Estate Planning Tool
In contrast, a trust is a legal arrangement where one person (the grantor) transfers property to another person (the trustee) for the benefit of a third party (the beneficiaries). Trusts can be created during the grantor’s lifetime or upon their death. They offer more flexibility and control over asset distribution compared to wills.
One of the primary advantages of a trust is that it can be effective during the grantor’s lifetime. This means that the grantor can specify how their assets should be managed and distributed while they are still alive. Trusts also avoid probate, as the assets are already transferred to the trustee, and they remain private.
Types of Trusts
There are various types of trusts, each with its own set of rules and benefits. Some common types include:
– Revocable Trust: The grantor can change or revoke the trust during their lifetime.
– Irrevocable Trust: Once created, the trust cannot be changed or revoked by the grantor.
– Living Trust: Created during the grantor’s lifetime.
– Testamentary Trust: Created in a will and becomes effective upon the grantor’s death.
Conclusion
In summary, the main difference between a will and a trust lies in their purpose and effectiveness. A will is a basic estate planning tool that goes into effect after death and requires probate, while a trust offers more control and flexibility, both during the grantor’s lifetime and after their death. Depending on an individual’s estate planning goals and needs, either a will, a trust, or a combination of both may be the best option. Consulting with an estate planning attorney can help determine the most suitable approach for each unique situation.
