Want to know what is the difference between a will and a trust? Read this in-depth article to get all the details.
A will specifies property distribution after death. In contrast, a trust involves a trustee managing assets for beneficiaries. The key distinction is that a will applies post-mortem, whereas a trust can be established during one’s lifetime. A trust can also persist beyond death.
Go through this comprehensive article to learn more about it.
Definition And Purpose
A Will refers to a legal document that represents an outline of how a person’s property and assets will be distributed after they pass away.
A Trust is a legal arrangement that allows a person to transfer their assets to a separate entity managed by a trustee, who will distribute the assets according to the terms of the trust.
Probate
When someone passes away, their Will goes through a legal process called probate. This means that a court reviews the Will and ensures it is valid, settles any debts or taxes, and distributes the assets.
A Trust does not go through probate. Since the assets have already been transferred to the trust, the trustee can distribute them without court involvement.
Privacy
A Will becomes a public record once it goes through probate. This means anyone can access and learn about the departed person’s assets and distribution.
In contrast, a Trust maintains privacy because it does not go through probate. The details of a Trust are kept confidential, and only the trustee and beneficiaries know the assets and distribution.
Flexibility
A Will allows the person creating it, also known as the testator, to name an executor who will carry out their wishes and distribute the assets. It also allows the testator to name guardians for minor children.
A Trust offers more flexibility as the creator, also known as the grantor, can not only name a trustee but also set specific conditions for the assets’ distribution. For example, a trust can be designed to distribute funds gradually over time or only under certain circumstances.
Time And Cost
Probating a Will can be lengthy and expensive as it involves court hearings and legal fees.
A Trust, since it avoids probate, can save time and money. Still, setting up a Trust initially can be more expensive than creating a simple Will.
FAQs
1. Is A Trust Better Than A Will?
A will takes effect after a person passes away, while a trust can be used while they are alive. A trust helps keep things private and avoids a complicated legal process called probate. To make the right choice, it’s important to ask a lawyer for help.
2. Is It Better To Have A Will Or A Trust?
A will states who gets your property after you die, while a trust holds assets for beneficiaries. Unlike a will, a trust can manage assets, avoid probate, and offer privacy. Consult an attorney to choose the best option for you.
3. What Assets Cannot Be Placed In A Trust?
Certain assets cannot be placed in a trust. These include IRAs, retirement accounts, life insurance policies, and assets held jointly with another person. A trust can hold assets that are transferred into it. A will can cover all of your assets, including those not placed in a trust.
4. What Type Of Trust Is Best?
Different trusts serve distinct purposes, with a revocable living trust often advised for its flexibility in asset management and seamless estate transfer without probate. However, the ideal trust type depends on your goals and circumstances. Seek legal counsel to determine the most fitting trust for your needs.
Conclusion
Now, from the whole discussion, the differences between a will and a trust must be clear.
A Will and a Trust are legal documents used to distribute a person’s assets after they pass away. While both serve this purpose, a Will goes through probate, becomes a public record, and offers less flexibility compared to a Trust.
On the other hand, a Trust allows for privacy, avoids probate, and provides more flexibility in asset distribution. Whether someone chooses to have a Will, a Trust, or both, it is important to seek advice from legal professionals. It ensures their wishes are properly documented and followed.