Wills and trusts serve many of the same purposes, so it is natural that the two are often confused. Both are important estate planning tools that help you organize your assets and ensure they are passed to the right people when you die. Both require the help of an experienced trust attorney or estate planning attorney to draft. And both are often mistakenly thought of as only needed by the very wealthy or very old.
Despite popular misconception, wills and trusts are crucially important for everyone—not just for the privileged or those nearing the end of their lives. Wills and trusts secure your assets (no matter how large or small), protect your well-being, and, importantly, ensure the continued prosperity of your loved ones. These are things everyone needs.
The above notwithstanding, wills and trusts are not the same, and understanding their differences is a key part of understanding how each provides security and prosperity.
Wills vs Trusts: A Primer
1. Last Will and Testament
Your last will and testament (commonly referred to as simply your will) dictates where you want your assets to end up after you die. Drafting a will includes naming beneficiaries and appointing an executor or personal representative to carry out your wishes.
In addition to directing the distribution of your assets, your will is a place to name guardians for any minor children or dependents, provide instructions related to your funeral, and address any other matters that require attention after you die.
To fulfill its intended purpose, your executor or personal representative files your will with your state’s probate court following your passing. This provides your chosen executor or personal representative the legal authority to carry out their duty.
Probate is often a taxing and tedious process and, what’s more, court records are publicly accessible, meaning the contents of your will are not private. Trusts present an alternative avenue for distributing your assets, and do not suffer from either of these drawbacks, making them preferable in certain cases.
Trusts come in many different shapes and sizes, but all share the common feature of allowing you to transfer assets out of your estate for the benefit of a third-party beneficiary. Assets that are properly placed in a trust fall under the ownership of the trust. Their use is determined by the trust’s terms, and the fiduciary responsibility for carrying out these terms falls to a designated person or entity, referred to as the trustee.
Where a will takes effect upon death, a trust takes effect as soon as asset transfer occurs. A trust may be funded during a person’s lifetime (referred to as a “living trust” or “revocable trust”) or after one’s passing (referred to as a “testamentary trust”). Further, trusts can be revocable or irrevocable, and each of these options serves a different purpose.
One of the most appealing features of a trust is its ability to provide you with complete control of your assets after you die. A trust agreement may stipulate, for instance, that the beneficiary can only access the assets contained therein after a certain age, or if they fulfill certain requirements (like going to college, for instance). Further, trusts can be used to protect the inheritances of loved ones with addiction or money management issues.
Lastly, assets contained in a trust can pass directly to beneficiaries without probate court’s intervention, thus simplifying the process, and keeping the details of your estate private.
To learn more about wills vs trusts, or to speak to an experienced trust attorney about any other matter related to the subject, do not hesitate to contact the dedicated team at Caress Law either by calling (503) 292-8990 or using the contact form on our website.