Wills and Trusts: How are they different?

Just by the name, Last Will and Testament, many people can figure out that a Will takes effect upon someone’s death, at which point that person’s wishes for distribution of their assets are to be carried out. There are various benefits of a Trust; one such benefit is that it can take effect immediately. You can plan for what happens at your death, but with a Trust you can also plan for what happens on your incapacity (if you can’t act on your own). There are a number of benefits of a Trust.

Wills

  • A Last Will and Testament (“Will”) is a legal document that outlines how you want your property and assets to be distributed upon your death.
  • Wills are generally limited to your own assets.
  • You may nominate an executor, a representative, who will be legally responsible to carry out your directives as written, but this nomination is not truly effective until formal appointment by the Court.
  • Wills leave your estate subject to the Court’s Probate system. The Court will oversee the process and ensure that your property is distributed exactly as you prescribed. Probate is a time consuming and costly process.
  • A Will that goes through the probate process is a matter of public record.
  • Wills may include specifics for funeral arrangements, nominations for a guardian for your children, and other details not included in a trust.

Trusts

  • Trust is a legal agreements where one party (the “trustee”) is the legal title-holder of assets that will be distributed to another party (the “beneficiary”).
  • There are two types of beneficiaries: Current, those who receive the gifts of the trust during their lifetimes and another set, contingent beneficiaries, who receives them after the first set dies (example: children and grandchildren).
  • Trusts are appealing to many because they allow you to distribute assets prior to your death.
  • Trusts are more flexible then Wills in that you can structure gifts to your beneficiaries; you may want a tiered distribution so that a child (or young person) does not receive everything at once.
  • Because Trusts can often avoid the Court’s Probate process, Trusts may help to keep the process private and not a matter of public record.
  • By avoiding the Probate process, Trusts can be administered far more effectively and efficiently, in terms of time and cost, usually.
  • Trusts allow you to distribute only that property that is legally placed in the trust itself; trust funding is a crucial part of the process and is often minimized or overlooked.

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