Understanding the Differences between Trusts and Wills

Understanding the Differences between Trusts and Wills

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Comparison Between Wills and Living Trusts

Revocable Trusts vs Wills

Wills

Revocable Trusts

A complete estate plan includes both a will and a trust. Many people are fairly familiar with what a will is and most people have heard of a living trust but are not familiar with the specific purpose of each document, how they differ, why they might need both, or how the two documents work together. There are similarities between the two but they both have some advantages or purposes that differ.

Wills

A will goes into effect when the testator (the person who created the will) dies. The will provides instructions to the court for assigning guardians for minor children and distributing the personal property and other assets of the decedent. However, the benefits of a will as a standalone document are limited. When someone passes away with only a will, the estate goes through probate, an expensive and lengthy court-supervised process. In probate, the estate and proceedings become public record. When a will is accompanied by a trust, the family is able to avoid probate. That’s just one of the many benefits of having a trust-based estate plan.

Living Trusts

Unlike a will, a trust goes into effect the moment that the trust documents have been signed, rather than upon the death of the grantor (the person who is the creator of the trust). A trust only covers the specific property which has been transferred to it. In some situations, a trust may protect beneficiaries from creditors. Courts do not oversee the administration of a trust and therefore trust documents are not part of the public record. In some situations, especially for married couples, there may be tax advantages to having a trust. A trust also allows the grantor to have more control over the distribution of his or her assets. For example, property held in a trust can be distributed to beneficiaries in smaller ongoing amounts rather than in a single lump sum, which may be more appropriate for beneficiaries who are minors or who are disabled. Finally, although it is possible to contest a trust, it is more difficult to contest a trust than a will.