What’s the Difference Between a Will and a Trust?
Wills and trusts are two of the most important estate planning tools. While there are some similarities between the two, they are separate vehicles that accomplish different sets of goals. A will can be used in conjunction with a trust in many cases, although there are instances when a simple will is sufficient. It all depends on the unique circumstances of the individual who is setting up the estate plan.
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Wills vs. Trusts: An Overview
Most individuals begin their estate plan by either drafting a will or creating a trust. Here are some of the important characteristics of each:
A will, also known as a “last will and testament”, is a legal document that takes effect at the time of the creator’s death and provides direction on who will receive assets and property from the decedent’s estate. A will can also provide instructions on who will become the guardian of any minor children that the decedent had. The document names an executor who is in charge of carrying out the decedent’s final wishes.
A trust is a legal arrangement in which the person who sets it up, known as the “grantor” or “trustor”, transfers assets and property into it to be managed by a trustee. The trustee is a fiduciary who has an obligation to manage the trust in accordance with its terms and conditions and in keeping with the best interests of its beneficiaries.
Trusts are significantly more complicated than wills, and there are several different types that can be used to accomplish various purposes. For example, a revocable trust can be altered, amended, or terminated during the lifetime of the grantor, whereas an irrevocable trust cannot be altered once it is set up.
Revocable trusts are typically created in order to bypass probate, while irrevocable trusts are often formed for the purpose of avoiding estate taxes. There are a number of other types of trusts that can be used for certain purposes, such as benefiting a favorite charity or providing for an adult special needs child.
Frequently Asked Questions (FAQs) on Trusts vs. Wills
Q: What property can be inherited through a will or a trust?
A: A will covers only the property that is in the name of the decedent at the time of their death. A trust covers only the property that has been transferred into it.
Q: What are the main advantages of creating a trust over a will?
A: Some of the primary benefits of setting up a trust include:
- Avoiding probate. Assets within a trust can be transferred directly to beneficiaries without the need for probate.
- Greater control. With a will, you can name your heirs – those who will receive your property and assets and what they will receive. With a trust, you can set more specific rules on how your beneficiaries receive what you want them to have. For example, a trust can dictate that a beneficiary receives property based on certain life events, such as graduating from college, getting married, or turning 25.
- Privacy. After a will is probated, it becomes part of the public court record. Trusts, on the other hand, allow you to keep your family business private.
Q: What are the disadvantages of creating a trust over a will?
A: The main drawback with trusts is that they are more costly to create and once created, they require some ongoing record-keeping and administration. This may be more trouble than it is worth for some individuals.
Q: How do I know if a trust is right for me?
A: As a general rule, trusts are best for those with more complicated estate planning needs. This would include individuals with a substantial amount of assets and property and those with unique assets. To find out whether it makes sense for you to set up a trust, speak with an experienced estate planning attorney.
Contact Our Skilled and Knowledgeable Virginia Estate Planning Firm
Wills and trusts are valuable tools that, when drafted and created correctly, can be used to develop an estate plan that effectively addresses the specific needs of the individual who sets it up. At Buck, Toscano & Terezkerz, we know that estate planning can seem intimidating and confusing, and we are here to help you make sense of it all.
Message us online or call our office today at (434) 977-7977 to schedule a personalized consultation with one of our attorneys.