Someone drafting an estate plan typically wants to provide instructions about what should happen after they die. They create testamentary documents describing their wishes for a memorial service, naming someone who could act as a guardian for their minor children and outlining what should happen with their property.
Testators putting together an estate plan typically have the option of including either a will or a trust as their primary testamentary document. They could also use a combination of the two instruments in certain scenarios. Many people struggle to understand which option would be the better choice in their current circumstances. To make the best choice possible, people must understand the main differences between wills and trusts.
What differentiates a trust from a will?
One of the most important distinctions between a will and a trust is when the document takes effect. Wills only have legal authority after someone dies, but trusts can take effect while someone is still alive. Depending on the type of trust someone creates and how they structure it, they could serve as the first trustee of the trust and could use the trust to shield some of their assets from collection activity and other threats as they age.
Another difference is that a will is a document that provides legal instructions, while a trust is a legal entity someone creates with special paperwork. Trusts are separate from the trustor who creates them. They have the legal authority to control and hold various resources.
Additionally, trusts can provide ongoing oversight from a trustee regarding the use of trust resources. Wills simply ensure the transfer of assets to a specific beneficiary after someone’s death. Assets bequeathed in a will pass through probate court and could be subject to creditor claims. Assets held by a trust usually do not need to pass through probate court before their distribution to beneficiaries. Finally, it is often much more difficult for people to challenge or contest a trust than it is for them to take legal action against a will when they oppose someone’s estate plan.
Understanding the distinctions between these two popular testamentary documents can potentially benefit those who are planning their estates.