I am often asked what the difference is between a will and a trust, and I usually feel the expected answer is supposed to be a satisfactory two or three sentence answer. Unfortunately, my explanation is not that simple. When you’re waiting for disbursement of goods from a will or trust, nobody wants to be left wanting, or feel left out — like my dog Gracie at the dinner table!
The differences between a will and a trust are complex, but to start, here is a simple explanation of the similarities:
Both a will and a trust distribute assets when you pass away, but the disbursement methods are completely different.
Trusts can Avoid Probate
First, a will takes effect only after you die, and a will needs to go through probate. Many people incorrectly believe that wills avoid probate. A will guides the probate process, but probate with the court is necessary. Trusts can go into effect immediately, so a trust can own property now, and a trustee is in charge of the assets a trust owns.
In a trust, a trustee controls assets and distribution of assets owned by the trust. The trust document can designate a person, or entity, as a successor trustee. The successor trustee can take over administration of the trust after the trust creator’s death. Since a trustee controls assets owned by the trust, no probate is necessary, as the trust dictates asset distribution and the trust survives a trust creator’s death.
Trusts are Useful in Many Situations
If property is owned in multiple states, each state requires probate. Trusts can avoid probate if assets are titled in the name of the trust. Trusts still exist after the death of a trust creator, to be distributed under circumstances dictated in the trust. This can allow for asset protection and control of assets beyond the grave, which helps if circumstances exist that make outright transfers a bad idea.
Wills and Trusts Have Different Purposes – as Do Different Types of Trusts
Trusts cannot name a guardian, so a will needs to name one. Even with a trust, you need a will. A trust can allow those with special needs or other potential problems to be properly cared for and help protect assets from creditors and other claims, if properly structured. The proper type of trust depends on individual facts and circumstances, and consulting with an attorney to determine the correct trust to use is essential.
This article only briefly address what a trust can do, and only by consulting with a professional can you get a complete answer on whether a trust is right for you. Schedule an appointment today for your free consultation!