Are you confused about the differences between wills and trusts? If so, you are not alone. It is always smart to contact an estate planning law firm, such as Sansone Law, to create a personalized estate plan that helps you achieve your desired outcome. However, it is also important for you to understand the basic distinctions between wills and trusts. Here is a quick and simple reference guide to help you understand these differences and answer any questions you might have:
What Revocable Living Trusts Can Do – That Wills Cannot Do
● Avoid a conservatorship and guardianship. A revocable living trust allows you to authorize your spouse, partner, child, or other trusted person to manage your assets should you become incapacitated and unable to manage your own affairs. Wills only become effective when you die, so they are useless in avoiding conservatorship and guardianship proceedings during your life.
● Bypass probate. Property in a revocable living trust does not pass through probate. Property that passes using a will guarantees probate. The probate process is designed to wrap up a person’s affairs after satisfying outstanding debts. However, the drawback is that probate is public and can be costly and time consuming – sometimes taking years to resolve.
● Maintain privacy after death. Wills are public documents. Trusts, however, are not. Anyone, including nosey neighbors, predators, and unscrupulous “charities” can discover the details of your estate if you have a will. Trusts allow you to maintain your family’s privacy after death by helping keep your estate out of probate.
● Protect you from court challenges. Although court challenges to wills and trusts occur, attacking a trust is generally much harder than attacking a will because trust provisions are not made public.
What Wills Can Do – That Revocable Living Trusts Cannot Do
● Name guardians for children. Only a will can be used to name guardians to care for minor children. A living trust cannot name guardians to care for minor children. A valid will should be a bare minimum for anyone with children.
● Specify an executor or personal representative. Wills allow you to name an executor or personal representative. An executor or personal representative is someone who will take responsibility to wrap up your estate after you die. This typically involves working with the probate court, protecting assets, paying your debts, and distributing what remains to beneficiaries. However, if there are no assets in your probate estate, this feature is not necessarily useful. If you have a fully funded revocable trust, you will not have any assets in your probate estate so probate will not likely be necessary.
What Both Wills & Trusts Can Do:
● Allow revisions to your document. Both wills and revocable trusts can be revised whenever your intentions or circumstances change so long as you have the legal capacity to execute them. However, irrevocable trusts can only be changed under limited circumstances.
● Name beneficiaries. Both wills and trusts are vehicles that allow you to name beneficiaries for your assets.
o Wills simply describe assets and proclaim who gets what. Only assets in your individual name will be controlled by a will.
o While trusts act similarly, you must go one step further and “transfer” the property into the trust. Transferring assets into your trust is commonly referred to as “funding.” Only assets in the name of your trust will be controlled by your trust so it is important to ensure you fund your trust completely.
● Provide asset protection. Trusts, and less commonly, wills, are crafted to include protective sub-trusts that allow your beneficiaries access but keep the assets from being seized by their creditors such as divorcing spouses, car accident litigants, bankruptcy trustee, and business failure.
While some of the differences between wills and trusts are subtle, others are not. Together, we will take a look at your goals as well as your financial and family situation and design an estate plan tailored to your needs. Call Sansone Law today and let us get started on your estate plan.