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What are the main differences between a will and a trust?

On Behalf of | Jan 17, 2024 | Estate Planning

Every person engaged in estate planning has their own priorities and needs. However, the creation of testamentary documents to establish a legacy and protection for one’s dependent family members is a cornerstone of the modern estate planning process.

Individuals with valuable property or vulnerable family members create documents specifically to allow their assets to pass to beneficiaries of their choosing after their death. Testamentary instruments that people tend to use during estate planning are wills and trusts. Some people even use both documents as part of an estate plan. Testators establishing an estate plan can accomplish very different goals with wills and trusts as elements of their broader approach.

A will helps guide the probate process

After someone dies, the probate courts may oversee the distribution of their assets. When people die without any testamentary documents, state law determines how the courts divide the assets among their closest family members.

The courts can also oversee estate administration when someone has a will to ensure that a personal representative follows someone’s instructions. A will allows for the direct transfer of specific assets to the beneficiaries that someone names. A will can also name individuals to serve as guardians for the children in a family.

A will only has authority after someone actually dies, and it helps determine what happens during probate proceedings. Assets that pass through probate court are sometimes vulnerable to creditor claims or other financial responsibilities.

A trust is a separate legal entity

Trusts can serve as testamentary documents. They provide clear instructions about what someone wants to do with their assets. However, trusts have authority as soon as someone establishes or funds them, not only after their death.

Some people establish living wills and serve as the first trustee of the trust they create. They can manage the assets in the trust until their death. At that point, a successor trustee takes over that role. Assets in a trust are usually not part of someone’s estate and do not have to pass through probate court. They are therefore insulated from creditor claims and other financial obligations.

Trusts can give a testator more direct control over what beneficiaries do with their inheritance. Trusts can limit access to assets and even grant someone use of a resource without ownership or control over it.

There are multiple types of wills and trusts, and people may find both instruments useful depending on their personal circumstances. Learning about the basic documents included in many estate plans by seeking legal guidance may help people more effectively plan for their protection and long-term legacy.