Some Basics: What’s The Difference Between A Will And A Trust?
Wills and trusts are words that are often used interchangeably, but they actually have very different meanings, and can do very different things. It’s good to have a basic knowledge of the difference between these two instruments to understand how they impact your estate planning goals.
What is a Will?
A will is quite simply a document that says how your property will be distributed after you pass away. Although you draft a will when you are alive, the will has no force or effect until after you pass. So long as you do so in compliance with the law, you can always alter, delete, or amend your will.
The will also appoints someone to effectuate whatever you wrote in your will—that is, to handle the details to carry out the wishes stated in the will.
A will also must be probated, meaning that a court will need to oversee the will to make sure that whatever is in the will is being distributed the way that it is supposed to be distributed.
What is a Trust?
A trust is an arrangement where one person givens another person legal title to property, and tasks them with managing and distributing that property for the benefit of a third person, the beneficiary. The most common type of trust is a living trust, where you are all three people in the above scenario. You will give your property to yourself to manage and distribute for the benefit of yourself.
The reason you would ever create this seemingly ridiculous arrangement, is because a living trust will allow you to name successor trustees and other people who will become beneficiaries once you pass away. Unlike a Will, your successor trustee can take over immediately upon your death and begin carrying out your instructions without needing court oversight or approval.
A trust also allows for far greater flexibility with planning, and you can include specific directives as to how property is administered. For example, you can leave money to someone so long as they care for your dog. You can say someone only gets money after they graduate college. You can specify how money is to be spent. You can time out, or condition distribution on almost anything that you want.
If you put all your property into your living trust, when you die, there should be no probate needed, which will make the distribution process easier, faster and cheaper. Additionally, because there is no probate, and thus no court case, a trust is more private than a will.
Trusts can be permanent— revocable or irrevocable. An irrevocable trust cannot be changed easily after being established. However, an irrevocable trust can have other benefits, like some asset protection advantages, or tax advantages, that a revocable trust or a will doesn’t have. Because there are so many different kinds of trusts, you can tailor the kind that you want to suit your specific goals.
Even if you have a trust, you will still need a will, partly to ensure that any assets outside of your trust get put into your trust at your death (a pour-over will), and partly because there are some things a will does that a trust doesn’t do. For example, you will name guardians for your minor children in your will.
Ask us what the right estate planning tools are for your specific needs? Call the Torrance estate planning attorneys at Samuel Ford Law today.