Will vs. Trust: What’s the Difference?
What is the difference between a “will” and a “trust”? Both are common estate planning tools, however many Ohioans do not know the differences between the two documents.
A will is a legal record of who will receive your property at your death, who should act as a legal representative to carry out your final wishes, and who you would like to have guardianship for any minor children you may have. Without such documentation, the court and state would make these decisions for you. A will controls any property that is in your name when you die.
A trust (or living trust) is a document used to transfer property to beneficiaries. More specifically, a trust is a legal agreement in which a named person, a “trustee,” holds legal title to property for a named person, a “beneficiary.” Sometimes, the trustee and beneficiary are the same people. Confused yet? In addition, a trust only controls property that has been transferred to or titled in the name of the trust. Unlike a will that goes into effect after you die, a trust takes effect upon creation. A trust can be used to begin distributing property before death, at death or afterwards through delayed distributions. Many trusts have additional benefits, such as tax savings or asset protection.
The biggest difference between a will and a trust the administration process. With a will, a court oversees the administration through a process called probate. Probate ensures the validity of the will, allows creditors to make claims against the estate, and confirms that property is distributed in accordance with the decedent’s written wishes. Unfortunately, probate can be a lengthy and costly process due to attorney fees and court costs. Also, anything court administered by the court becomes a public record. That’s why celebrities who die prematurely often have their dirty laundry made public. On the other hand, a trust is administered privately outside of probate, so court oversight of the process is not necessary. Administration of an estate through a trust can save many middle class families significant time and money.
Both wills and trusts have their place in the world of estate planning. When used together they can help form a comprehensive estate plan. To discuss whether a will or trust is appropriate for contact your local AlerStallings attorney. To find the nearest office, click here.