Estate planning professionals, especially lawyers, get a lot of questions throughout the estate planning process. One of the most common questions they get deals with the differences between a will and a trust. Before you can ask for a will or a trust, it is probably a good idea to understand what they are and why they are different.
A Legal Entity Versus A Piece Of Paper
The first difference between these two estate planning tools is that a will is a piece of paper, while a trust is a legal entity, much in the same way a corporation is a legal entity. A will is not powerless, but it is not its own entity. A will is basically a set of instructions the court uses to administer your last wishes. A trust is not based as much on your last wishes, and its more involved with management of property than distribution.
Moment It Takes Effect
The only time a will is enacted is after the subject of the will has passed on. Prior to the death of the subject, a will has no power over any property distribution and it cannot be used to determine property ownership.
A trust takes effect the moment it is signed into existence. There is property that is moved into a trust that the trustee can transfer ownership of whenever they want. A trust can also be used to set up charitable funds during the subject’s lifetime, and it can also be used to dictate business decisions and property distributions many years after the trustee has passed on.
A will is used to transfer property that is owned by the deceased. A will can only designate property distribution as it applies to the deceased, and it cannot dictate any other property ownership changes.
When a trust is created, property is transferred into the trust from anyone who decides to transfer it. Once a property is transferred into the trust, the trust as a legal entity owns that property can can transfer it to whomever it wants. A trust cannot say that it transfers all of the property of the deceased trustee to someone else because it is not a will. A trust can only transfer that property which it owns.
The Probate Process
A will has to pass through probate before it is approved and acted upon. If the court finds anything wrong with the will, then the deceased’s final wishes may not be honored.
A trust does not have to go through a probate process, which means that a trust does not have to take on the extra fees of a probate court and is a much faster solution. If you are looking for a way to get your assets transferred to loved ones without paying for a probate court and waiting months for everything to be finalized, then you need a trust.
A trust and a will are both powerful tools in the estate planning world, but they are very different. With a trust, you are creating an entity that can take on any property and distribute property as it sees fit. With a will, you are creating a set of instructions for a probate court for transferring ownership of your property after you have passed away. Only your attorney can give you the right answers when it comes to deciding between a trust and a will.