Knowing the difference between a Will and a trust is crucial, as well as how they will work for you as estate planning tools.
Estate planning is unique to the particular circumstances of the individual or family. However, the two different tools that often come to the forefront are Wills and trusts, according to nwitimes.com in “Estate Planning: Distinct differences between Wills and trusts.”
A traditional Will is a document that provides instructions regarding your final affairs: what to do with your property after death. It also enables you to nominate the person you would choose to carry out your wishes—your executor—and if you have minor children, who you want to rear them—a guardian.
The Will is not used for anything during your lifetime and becomes effective when you die. In most cases, it needs to be presented to a court. The presenting of the Will to a court, and the appointment of a personal representative (“executor”) even if there is no Will, is known as probate.
Trusts are different. A trust is a legal entity that can own property and provide certain benefits to the beneficiary. Think of a trust as a box in which you place certain assets. You don’t own the assets—but you do own the box.
In most cases, the creator of a revocable living trust is also the beneficiary and the trustee. There’s no difference in how you address property transactions, other than how you transact business. To sell a home, the deed is signed by the trustee, rather than the individual, because the trust owns the home.
If a revocable living trust is fully funded during your life (it owns everything of yours it can legally own, and is named death beneficiary of assets like IRAs), you can usually avoid probate.
Revocable living trusts are the dominant choice these days for all but very, very modest estates. In such cases, instead of a traditional Will, the attorney will draft what is known as a “Pourover Will”. The Pourover Will is typically very short and merely pours anything that happens to go through probate into the Revocable Living Trust. There are a few exceptions; for example, traditional Will planning without revocable living trusts still dominates in the New York City area.
Trusts can also be written into the body of a Will (called “Testamentary Trusts”). Trusts can achieve an enormous array of planning goals, including asset protection for children after you die, and leaving an inheritance for special needs children without disqualifying them from public benefits.
An estate planning attorney specializing in all four areas of trusts, tax, special needs, and elder law (like Special Needs Law Group of Massachusetts, PC) can advise you in creating an estate plan that fits your unique circumstances.
Reference: nwitimes.com (Jan 21, 2018) “Estate Planning: Distinct differences between Wills and trusts”