Many individuals believe the terms “will” and “trust” are interchangeable with one another. After all, both words are terms people have heard a myriad of times over the years, making it easy to confuse their subsequent meanings. While both are essential pieces of the estate planning process, they each serve different purposes.

 

The Main Difference Between a Will & Trust

 

Simply put, a will refers to a legal document that goes into effect after you’ve passed on. A will is utilized as a way to designate who will receive your property after you’re gone. The will appoints a legal representative in order to follow through with the desires you’ve laid out in your will. 

 

A trust, on the other hand, will take effect as soon as it’s created. A trust can distribute property prior to your death. You can appoint a single person or an institution, also known as a trustee. This person, or beneficiary, holds the legal title of the property for another person. There are two types of beneficiaries – those that receive income from the trust during their lives and those that receive allotted assets only after the initial set of beneficiaries pass on. 

 

Other Key Differences

 

A will covers property that is legally in your name upon your death. In other words, a will doesn’t cover any assets that are shared among others or within a trust. In a similar vein, a trust will only cover property that has been transferred into a trust.

 

In addition, a will has to pass through probate. What this means is that a court will oversee the administration of the will. The court will ensure that the will is valid and that property gets distrusted the way the deceased person specified in their will. This differs from a trust because a trust is able to operate outside the confines of probate. This means a court is not required to oversee the process. A trust is not only an effective means for saving time and money, but it can also remain private – as opposed to a will, which is accessible via public records. 

 

A will furnishes an individual with the ability to name a guardian for their child upon their passing. It also allows someone to specify funeral arrangements. A trust isn’t able to perform either of these actions. However, a trust can be used to formulate a plan in the event that someone becomes disabled or incapacitated. It also serves as a tax-saving vehicle. 

 

What Should You Do?

 

When you are navigating the estate planning process, it’s recommended that you utilize both a will and a trust. Each possesses their own unique set of advantages and disadvantages. You have the capacity to work closely with your attorney to formulate a strategic plan for how your wishes and assets are established in both your will and trust.

Still have questions about the differences between a will and a trust? Smith Barid’s team of experts are here to provide the personalized guidance and attention you need to set up your will and trust. The result? Having peace of mind knowing that your estate will be taken care of upon your passing.