The Top Five Differences Between Wills and Trusts

 

 

A trust will enable your heirs to avoid the probate court process, which can be a significant advantage.

 

Assets placed in a trust are immediately accessible to the trustee whereas assets left to beneficiaries of wills cannot be formally distributed until the probate process has been completed. Probate is a court-supervised legal progress wherein the court manages the distribution of a deceased person’s estate – and it is a process, making demands on both the time and finances of your heirs.

An estate is composed of all the assets, debts and claims pertaining to the deceased. If the deceased had a will, the court interprets the will to ensure that all debts and claims are resolved and that any remaining assets are distributed as intended by the decedent.

With a trust, the assets in the trust are immediately transferred to the trustee upon the death of the trustor (also known as the “settlor”) and probate is avoided. Additionally, while it is unusual for a trust to be contested, in the event that there is a legal dispute, it would be unlikely that the assets would be frozen until resolution. When a will is contested, the court generally freezes all assets until the matter is settled. This scenario can be avoided through the establishment of a trust.

 

A will can be revoked at any time whereas some trusts may be irrevocable.

 

 A will does not become active until the testator dies. This means that at any point, even at the very end of life, an individual may revoke or rewrite his or her will. With trusts, two specific types can be created: revocable and irrevocable. A revocable trust, much like a will, can be changed at any point during the trustor’s life (assuming mental competence). While a revocable trust can be altered, an irrevocable trust serves as a legal instrument that cannot be changed. There are advantages and disadvantages to each type; some individuals may find peace of mind knowing that their wishes are set in stone while others may want the option to change the terms of the trust as they navigate the various chapters of their lives.

 

Once established, the assets in a trust can be easily added, removed or sold, without having to rewrite the trust.

 

Throughout the trustor’s lifetime, usually only a signature is needed to make changes to the assets held in the trust; for instance a home in the trust’s name may be sold and new one purchased. This allows for ease and flexibility not found in a will. However, accurate record keeping is essential when managing a trust as any failure to place an asset in the name of the trust prior to death may leave said asset subject to probate. While wills can certainly be changed and amended (usually through codicils) usually the same formal procedure must be followed with each change to ensure that it will be considered valid upon death.

 

A trust is a private document whereas a will must be filed with the courts and is a matter of public record.

 

 Privacy is very important to some individuals, most especially if they have a large amount of assets to bequeath – and the desire for privacy extends to their heirs. Since wills are public documents available upon request to virtually anyone approaching the court, the names of heirs along with specific amounts of money and assets also become a matter of public record.

While the law varies from state to state with regard to notifying “heirs-at-law” of the existence of a trust upon the death of the trustor, as well as the identity of the trustee, at no point is it required for a trust to be recorded and become a matter of public record. Even in the rare event that a trust is contested in a court of law, the details of the trust should remain undisclosed.

 

Creating a trust is initially more expensive than a will.

 

 However, while a draft of a solid trust may be a relatively expensive endeavor upfront, the costs of not having a trust may be spent in probate court. While there is not a set fee for probate costs, each appearance and filing along with the other expenses of legal administration can, in some cases, quickly add up to exceed the cost of establishing a trust.

As a final note, it is important to know that wills and living trusts are not necessarily mutually exclusive; some individuals choose to incorporate both legal instruments. Consulting with a qualified estate planning attorney is the best way to decide which instrument will best suit your needs. 

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