Trusts and wills accomplish the same goal in a different time frame. Wills transfer ownership of property and finances to beneficiaries when the owner dies. Trusts transfer ownership of property and finances to the trust while the trust creator is still alive.
Using a will, assets belong to the owner up until the moment of death. After the owner dies, an executor must execute the will to distribute the property in the manner set forth by the owner in the will. This process can take some time, and a probate process will be required for any real property or money that is not jointly owned or specifically included in the terms of the will.
Wills can also be problematic when an owner becomes mentally or physically incapacitated. Because the owner is not dead, ownership of the assets is not transferred. Because the owner is incapacitated, however, there is often no way for the assets to be used even for the owner’s benefit.
When a grantor creates a trust, ownership of included assets is immediately transferred to the trust. The grantor, as trustee for the trust, retains full use and control of the assets. When the grantor dies or becomes incapacitated, control of the trust passes to any named successor trustees. They have immediate access to the assets of the trust.
Successor trustees are typically the heirs who would, if there was a will instead of a trust, have been named as beneficiaries. The trust continues to own the assets, but the named successor trustees have immediate control and use of the assets.
Wills for large estates are frequently contested. Relatives with tenuous claims to the deceased owner’s assets may allege that the deceased had changed his or her mind about the final distribution, and lengthy legal proceedings may be required to sort out the details. Trusts are typically less contestable. Tenuous heirs may allege that they should be named as trustees, but the assets still belong to the trust.
When used to distribute assets to minors, wills can easily name a guardian who will hold the assets until the minor comes of age. With a trust, assets for minors are typically released when certain milestones are reached. For example, funds may be made available from the trust when a minor enrolls in college, becomes engaged or reaches a certain age. Trusts are more flexible than wills with regard to these matters.
An experienced estate planning attorney can help you choose which documents and provisions best suit your needs and objectives. For many of our clients, the combination of a living trust and a pour-over will to manage assets during lifetime and after death, together with a durable power of attorney and advance directive is the best choice. If you have less than $150,000 in total assets, you might choose to dispense with a living trust unless you wish to ensure your assets are managed rather than simply distributed to beneficiaries upon your death.
The Differences between Trusts and Wills
Planning your estate can be a daunting task. There are quite a few options available in formulating an estate plan. Two of the most common options are wills and trusts. While both serve as useful tools in distributing up your property and assets, there are some key differences to consider from our estate planning attorneys.
The primary difference between wills and trusts is that a will takes effect upon your death, while a trust can go into effect immediately if you so choose, allowing you or your designated trustee to manage your assets during your lifetime. With a will, you designate who receives which assets after your death and your wishes are ultimately determined by a probate judge who then enters a court order distributing the assets of your estate.
In contrast, a trust permits you to designate your beneficiaries but avoids probate court since your named trustee(s) or successor trustee(s) are empowered with the ability to distribute assets held in trust, thereby avoiding the time and expense of probate court. Many clients enjoy this aspect of their trust the most. It provides them peace of mind knowing that their beneficiaries will not be saddled with the cost of pursuing a probate case, which is typically thousands of dollars at a minimum, or have to wait for a final distribution by a court in order to receive their inheritance.
A trust also permits you to choose the timing of any distributions to beneficiaries, whether it be immediately upon your death or in increments over their lifetime or when they reach the age of majority. Having this flexibility in controlling when and how beneficiaries receive assets or income is an important benefit to some individuals.
Other key differences between wills and trusts include privacy and the guardianship of children. After you die, a will becomes public record, while a trust does not. In addition, real property held in trust is titled in the name of the trust, not the name of the settlor or trustee, so it is more difficult for creditors to locate real property owned by you. This leads many people opting to create trusts so that they can keep their assets private.
However, if you wish to name a guardian or custodian for minor or disabled children upon your passing, that will require a will since custody or guardianship can only be granted by a court of competent jurisdiction.
Estate Planning Attorneys
While wills are relatively inflexible as compared to trusts, some individuals prefer to have their estate overseen by a probate court to ensure that their wishes are strictly adhered to. This is especially important if an individual is concerned with having court oversight to ensure their wishes are strictly adhere to. Experienced estate planning attorneys would be happy to answer other questions you may have concerning your estate planning options.