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 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 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.
The biggest difference? Certain trusts are effective during the lifetime of the person. Some trusts only become active when the person passes: a testamentary trust. Most trusts have powers, once they are set up. The will only becomes active, when a person passes away.
People like trusts because they think that trusts will help them avoid the probate process. However, trusts can also offer confidentiality and some protection, albeit limited, from creditors.
Trusts are not filed anywhere or recorded, so your children will probably only get a copy of the trust from you, while you are alive or from your estate planning attorney, who should maintain a copy.
An estate planning attorney 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”