A last will and testament and a revocable living trust are considered essential elements of a comprehensive estate plan, but there are important differences in how they function.
A will states who you wish to receive your individual property after your death. It also nominates a personal representative to carry out the will's instructions and can specify final arrangements. A will, unlike a trust, also can nominate a guardian for surviving minor children.
A grantor creates and controls a trust to manage, distribute and hold title to property in the present and future. As owner of the trust, the grantor can amend or revoke its provisions. A successor trustee manages the trust upon the incapacity or death of the grantor.
What are the differences between a will and trust?
When are wills and trusts effective?
One important difference between a last will and testament and a revocable living trust is that a will goes into effect only after you die, while a trust takes effect during your lifetime as well as after your passing. A will does not provide authority to manage your property if you become incapacitated.
A trust is effective during your lifetime and can be used to manage and distribute assets before death, immediately after death and into the future.
Is probate needed for a will or trust?
All wills must be validated through the court process of probate administration. Probate is required to determine the will's validity, appoint a representative, inventory property, pay debts and expenses, identify heirs and oversee property distribution. A will cannot distribute property without the probate process.
A trust, unlike a will, bypasses probate and therefore avoids both the costs and delays associated with the public legal process. The trustee is a fiduciary bound by the provisions of the trust and, unlike a personal representative, is not overseen by a judge. Trusts are effective without the probate process.
Does a will or a trust require funding?
A will does not require funding and is validated in the probate process after the death of its testator. Typically, a will requires signatures of two witnesses and notarization to be a viable legal document. A will directs the distribution of assets in your name when you die.
Assets must be properly funded into the trust for the trust be effective. When assets are properly titled in the name of the trust, the trust is fully “funded.” Assets not funded into the trust or lacking beneficiary designations pour over into the probate estate.
Are wills and trusts effective at incapacity?
A will is only effective upon death, therefore provisions of a will cannot address matters related to incapacity (the legally determined inability to make competent decisions).
A trust is in effect during your lifetime and can include plans for contingencies such as disability and incapacity that direct how assets are used for support and treatment. A trust also empowers the successor trustee you select with authority to carry out terms and provisions of the trust immediately upon incapacity.
Is the family in control with a will or trust?
With a will, the family lacks control. A probate judge has control through the court system. If a family member is appointed as personal representative for the estate or as a guardian for minor children, judicial approval must be received before those appointments can be formalized and effective. The personal representative's actions also are subject to judicial approval.
With a trust, the grantor of a trust maintains control throughout his or her lifetime. Control of the trust's assets can be passed to family members immediately upon incapacity or after death. A judge is not involved in trust administration.
Does a will or trust avoid guardianship?
Because a will is only effective upon death, it does nothing to avoid guardianship. If your plan is based on a will, a guardian will be needed if you are incapacitated.
Trusts work in conjunction with other legal documents, such as powers of attorney, to avoid court-supervised guardianships. A trust enables a successor trustee to manage the trust's assets while the grantor is incapacitated and eliminates the need or motivation for a court-appointed guardian to oversee financial interests.
Does a will or trust maintain privacy?
The contents of a probated will are a matter of public record. The names of representatives, beneficiaries and asset values are not private. Probate is a public process.
As a contract, a trust maintains privacy and is not a matter of public record. Unlike a will, a trust does not require public disclosure of names of trustees, asset values and beneficiaries. Trusts are not subject to probate.
Does a will or trust name a guardian for minors?
A will allows you to name a guardian for children under the age of 18.
A guardian cannot be named for a minor child through a provision of a trust. A trustee, however, can manage assets held by the trust for a minor beneficiary.