You've heard of a "will" and a "trust," but you may not know the differences between the two. You may be asking yourself, "Do I need a will?" or "Do I need a trust?" or "Do I need both?" Both wills and trusts are valuable estate planning tools that serve different purposes. Depending on an individual's circumstances, they may be used in conjunction with one another to create a comprehensive estate plan.
One of the greatest differences between a will and a trust is that a will goes into effect only after you die. With a will, you can make changes or amendments or rewrite it whenever you want prior to your death. If you decide you're unhappy with your will, you can tear it up and write a new one. A trust takes legal effect as soon as it's created, but if it's a revocable living trust, then it too can be amended or revoked as your personal circumstances or wishes change.
A will is a legal document that arranges for the distribution of your property after you die, it also appoints a personal representative or executor to settle your estate and carry out your wishes. In contrast, a trust can be used to immediately begin distributing property if you provide such instructions. With a trust, property distribution can commence before your death, at death, or at a later date.
A trust is a legal arrangement where a person or institution called a "trustee" manages the trust assets for the benefit of another person, called the beneficiary. You can be the trustee of your own trust and manage the trust assets while you're still alive. You would name a successor trustee to take over when you pass, who upon your death would manage the trust assets according to the directions you set forth in the trust document.
A will specifically covers any property that is in your name alone when you die. A will does not cover property held in joint tenancy or in a trust. On the other hand, a trust only covers property that has been transferred to the trust. In order for property to pass outside of probate and for it to be included in your trust, you will have to put it in the name of your trust.
Wills pass through probate, whereas trusts do not. With probate proceedings, the court oversees the administration of the estate and ensures that the property included in the will is distributed according to the decedent's wishes. Trust assets pass outside of probate automatically, so there is no need for the court to intervene, which can save time and money. Wills are matters of public record, and trusts remain private.
Both wills and trusts have their own unique advantages and disadvantages. For example, you can use a will to appoint a guardian for minor children and make funeral arrangements where a trust does not. A trust can be used to plan for disability and save on taxes, where a will does not.
Wills and trusts are essential estate planning tools. If you would like to learn more about the purposes that these documents serve, I urge you to contact me at Harris Law Offices. As a Haddon Heights estate planning attorney with over 30 years of experience, I can guide you in the right direction and help you create a plan that will promote long-term financial security and a lasting legacy for generations to come.