Everyone has heard the terms “will” and “trust,” but not everyone knows the differences between the two. Both are useful estate planning devices that serve different purposes, and both can work together to create a complete estate plan.
One main difference is that a will goes into effect only after you die, whereas a trust can take effect as soon as you create it. A will is a document that directs who will receive your property at your death. By contrast, a trust can be used to distribute property before death, at death, or afterwards.
A trust is a legal arrangement through which one person (an individual, or an institution, such as a bank), called a “trustee” holds legal title to property for the benefit of another person, called a “beneficiary.” A trust often has two types of beneficiaries — one set that receives both principal and income from the trust during their lives, and another set that receives whatever is left over after the first set of beneficiaries dies. A will covers any property that is in your name at the time you die. It does not cover property held in joint tenancy, having a beneficiary designation or in a trust. A trust, on the other hand, covers only property that has been transferred to the trust. In order for property to be included in a trust, it must be placed in the name of the trust.
Another difference between a will and a trust is that a will passes through probate. That means a court over-sees the administration of the will and ensures the will is valid and the property gets distributed the way the deceased individual wanted. A trust passes outside of probate, so a court does not need to oversee the process, which can save time and money. Unlike a will, which becomes part of the public record, a trust can remain private.
Wills and trusts each have their advantages and disadvantages. Your elder law attorney can tell you how best to use a will and a trust in your estate plan.
Ms. MacDonald’s practice is limited to Estate Planning, Probate, Conservatorships, Elder Law and Trust Administration. Ms. MacDonald maintains her practice in the Santa Clarita Valley at 25115 Avenue Stanford, Suite B-124 in Valencia, California. She can be reached at 661-294-6464.