If you’re thinking about the future and want to put the best possible plan in place to protect your loved ones, it’s crucial to understand the differences between a will and a trust.
In short, a trust allows for more flexibility in planning than a will. However, a will applies to all non-trust assets after your death, ensuring your wishes for all assets are covered. Additionally, certain trusts can be managed during your lifetime. Wills, on the other hand, only take effect after your death.
Despite their many differences, however, wills and trusts share one thing in common: They allow you to state your wishes for how you want your property to be inherited. Without either a will or trust in place, state laws would determine who your legal heirs are and how much of your estate they would inherit. This is known as “dying intestate.”
No estate planning attorney worth your time and money would advise you to die intestate. It can create a lengthy and costly probate process for your loved ones, not to mention may cause family turmoil and strife as your tangled affairs are straightened out.
Now that you have an idea as to how a will and a trust are both important, let’s delve a bit deeper into how each is individually important and different from the other.
What Makes a Will Unique?
You probably have a good idea about what a will is and does just from hearing about them in media and popular culture. A will – or last will and testament – is an estate planning document that describes your post-death wishes and becomes relevant as soon as you pass away.
You can make wishes in your will – or a trust, for that matter – such as the following:
- Choose a personal representative to administrate your estate
- Decide who will inherit property and how much (you can even account for specific items, like family heirlooms)
- Choose a legal guardian for your minor children
- Grant ownership of a beloved pet to a relative or friend
Unlike a trust, though, a will does not allow your estate to skip probate. This means that your estate’s administration must be supervised by a probate judge. The PR you’ve named in your will must submit the will to the court to begin proceedings, which are matters of public record and can be researched by anyone in the future.
Keep in mind that probate is necessary whether you have a will in place or not. You can cut down on the time and cost it will have on your loved ones with a clearly organized estate and properly prepared will, but there are some things that may not be within your control. If the court has a heavy caseload, it can affect how quickly your estate can be probated. Your loved ones may also be saddled with heavy court and attorney fees, which can dig into the inheritances you intended to give them.
Why Do People Choose a Trust?
The immediate distinction a trust has from a will is that it skips probate. This is, in fact, one of the main reasons why people establish trusts at all. Because probate isn’t private and can cost their loved ones valuable time and money, investing in a trust that bypasses probate can be a great investment for future generations of your family.
Trusts can skip probate because they are legal entities separate from the grantor’s (the trust’s creator) personal estate. By titling assets and property to the trust, these are effective removed from the grantor’s personal estate – in an ideal situation, nothing is left behind to go through probate.
Unlike a will, a trust is relevant as soon as it’s created. While certain provisions of the trust come into play after the grantor’s death, they and their beneficiaries can all benefit from assets placed in a trust during their lifetimes. Because there are many different kinds of trusts that exist for a variety of purposes, mileage [BC1] may vary on what a specific type of trust can provide.
Despite their suitability for niche purposes, trusts are “revocable” or “irrevocable.” Revocable trusts, allow the grantor to change the terms of the trust. Once created, the grantor can also use what’s in the trust and leave what’s leftover for their loved ones. Irrevocable trusts are difficult for grantors to change and their assets cannot be easily removed once funded. These limitations, however, come with certain estate tax advantages and a level of asset protection that revocable trusts do not provide.
Consider Choosing Both
While estate planning clients tend to lean toward creating a trust for all of the benefits and flexibility it can provide, they also create wills. Backing up a trust with a will ensures that your loved ones won’t have to deal with intestate probate for property you didn’t or couldn’t fund into your trust.
Do You Need Legal Assistance?
While there is still much to know about wills and trusts, we hope you understand by now some of the most important distinctions between them. If you have more questions about this topic or something else related to estate planning, please reach out to our attorneys for a consultation!
Get in touch with Kitzke & Canfield LLC today by calling (262) 387-0706 or by submitting an online contact form.