Living trusts and wills share a few characteristics, but they are two distinct estate planning tools. Many individuals have preconceived notions that trusts are only for the rich and famous, but every single person needs a will. That’s not often the case, though. The purpose of this blog is to lay out the key differences between these estate planning documents so you might come away with a better understanding of each.
Similarities Between a Will and a Trust
Both wills and trusts can distribute assets of the estate planner. The creator of a will is known as a testator, while a trust’s creator is referred to as a grantor. Distributions under a will occur after the testator passes away and the executor named in the will deals with the disposition of the estate. Conversely, a living trust becomes active as soon as it is created; it is up to the grantor to place assets into (fund) the trust. Then, when the grantor passes away or becomes incapacitated, the named trustee distributes the trust’s assets to beneficiaries according to the trust’s instructions. So, the two documents are alike in this respect, but the similarities end there.
What a Will Can Do that a Trust Cannot Do:
- If you have minor children, you are able to name a guardian for your kids in the event something happens to both parents. You cannot accomplish this with a living trust.
- You may make certain funeral arrangements known in your will.
- As long as assets are titled in your name (and your name only), you may bequeath them to beneficiaries in your will. Distributing these assets under a trust requires extra steps.
- Wills are generally less expensive and easier to set up than living trusts.
What a Trust Can Do that a Will Cannot Do:
- Assets in a living trust do not have to pass through probate court after the grantor becomes incapacitated or passes away. While wills can make the probate process more efficient, it does not allow you to avoid probate court altogether. Part of your estate will likely be used to fund the process in probate court, which means your beneficiaries will not enjoy your estate’s full value.
- Your loved ones will be spared the stress, time, and money associated with probate court if you fund a living trust with your assets.
- The assets contained in your trust can privately pass to your beneficiaries. Alternatively, the public will be able to see the assets distributed under your will.
- You are able to institute a wide array of terms and conditions to your trust that may not be available for wills. For instance, you may choose for your children to inherit a certain amount of your estate at different intervals in their lives. This can be useful if you worry about the maturity of one or more of your beneficiaries.
Conclusion
While the benefits of both wills and living trusts are numerous, there is plenty we did not cover in this blog. For example, many estate planners choose to use both wills and living trusts in tandem to meet their goals. You need to consult with an experienced and knowledgeable attorney to determine which estate planning documents you need.
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