If you are looking at establishing an estate plan, then you will most likely hear the terms “will” and “trust.” These two legal documents can do similar things for an estate plan.
But they are quite different, especially in the eyes of the law. Before you begin your estate planning, it is helpful to understand the differences between these legal instruments.
Read on to find out more about will vs trust.
The Difference in Definition
The difference between will and trust lies in their separate definitions. A will is a written legal document.
It outlines how a person would like their estate and possessions to be distributed upon their death. A trust, on the other hand, is an arrangement made between two or more people.
One of them holds and manages property or money for the benefit of the other. Typically, the settlor transfers an asset to the trustees, who then manage it on behalf of the settlor’s desired beneficiary.
The main difference between a will and a trust is that a will governs property after death. Trust functions as a mechanism for managing the property of the grantor during their life.
The Difference in Legal Creation
Wills and trusts are two different legal documents created for different purposes. Wills are typically used to assign and distribute personal property, while you can create trusts to manage and protect assets.
The main difference lies in their legal creation. A will is a legal document that has requirements regarding the format and must be signed and witnessed for the document to be legal and binding.
On the other hand, trusts do not have the same strict requirements. However, some states have specific requirements that you should meet.
After the creation of the will, it will take effect either at the time of death or upon the court’s declaration of validity. Trusts, however, take effect after the grantor’s death or as soon as the grantor ceases to act as trustee.
Ultimately, wills and trusts serve different purposes and should be created for different goals, as each can provide unique services. An estate planning lawyer can be an invaluable resource to help people understand the difference between a will and a trust.
The Difference in the Role of an Executor
The difference between a will and a trust is the role of the executor. A will is a document that assigns an executor the duty of disbursing assets according to the wishes of the individual who is passing away.
An executor must distribute their assets to the rightful heirs according to the law. The intended beneficiaries are listed in the deceased individual’s will.
A trust, in contrast, is an estate planning tool that allows an individual to transfer control of their assets to a trustee instead of an executor. The trustee has legal control of the assets.
It will manage and distribute the different types of assets according to the directions written in the trust document. This allows individuals to have more control over who has access to their assets.
The executor in the will must follow the law, whereas the trustee has legal authority and will have control over the assets. They make the decision on when and to whom the funds are disbursed. Therefore, an executor may have different roles depending on whether the deceased left a will or a trust.
Time Frame for the Distribution of Assets
For time frames associated with the distribution of assets, the main difference comes down to the distribution of the assets. With a will, the estate must be opened and assets distributed as quickly as possible.
This is usually within nine to eighteen months after the admission of the will to probate. On the other hand, with a trust, the distribution of assets to the beneficiaries will begin as soon as the trust is operational.
This will ensure that all beneficiaries have accepted their inheritance. This makes trust more efficient than a will, as it allows assets to be distributed to the beneficiaries more quickly and with more control.
Furthermore, with trust, you can distribute the asset in an orderly manner over some time. It gives the beneficiaries more time to prepare for the expected income.
Management of Assets
Wills and trusts are both commonly used as methods of managing assets. A will is a legal document that lays out the wishes of an individual (the testator) regarding the disbursement of their assets upon their death.
A trust is a legal agreement between a grantor and a trustee wherein the grantor transfers assets to the trust. The trustee will manage the trust for the benefit of one or more beneficiaries.
Whereas a will only take effect upon the death of the individual, you can set up a trust while the grantor is still alive. This can have an immediate impact on how they manage their assets.
Which Are Revocable and Non-revocable?
Wills and trusts can both be irrevocable or revocable, depending on the circumstances. A will is revocable as long as the person who created it is still alive.
This means the creator can change, add to, or revoke the terms in their will at any time. On the other hand, a trust is an irrevocable document, meaning its creator cannot make changes to it, and it cannot be revoked.
There are certain situations in which they can grant the modification of trust; however, this usually requires court approval. Generally speaking, a trust is a more secure way to ensure that the distribution of your assets is according to your wishes.
This is because a trustee manages the trust and holds a higher standard of care than the creator of a will. The trust also provides a better way to protect assets from creditors and estate taxes.
Understanding Will vs Trust
The will vs trust can help ensure that the distribution of your property is according to your wishes. It takes both trust and willpower to achieve success, whether it be in relationships, at work, or with other goals in life.
Take the first step and commit today; trust yourself and be willing to work! Contact an estate planning attorney now to learn more.
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