Will vs. Trust: Which Do You Need? A Comparison Guide
When it comes to estate planning, one of the most important ways that estate planning attorneys can help is by providing guidance on the most effective strategies and tools, for our specific circumstances and goals. That said, it’s useful to understand the basic differences between the two primary tools that anchor most estate plans: wills and trusts. Each can be helpful, and for many of us, having both a will and a trust can prove useful. Read on for pointers (and try to get your estate plan going—the worst plan is not having a plan).
Wills Kick In After Death, Trusts Are Effective During Life
When the primary concern is leaving affairs and assets organized for loved ones upon death, a basic will does the job well. In the face of longer lives, the potential for incapacity, complex asset management, and specific distribution arrangements, trusts are very handy, and attorneys can customize them based on particular needs and intentions. Estate planning attorneys at Barnes Walker summarize the main difference between a will and trust this way, “A Will speaks after you’re gone. A Trust can speak before, during, and after,” and offer this helpful overview:
What Is a Will? A Last Will and Testament is a document that takes effect after you pass away. A Will allows you to:
- Explain who should receive your assets
- Name a guardian for minor children
- Choose someone to manage your estate
- A Will must go through probate, a court process that reviews and approves the Will before assets are distributed.
What Is a Trust? A Trust is a legal arrangement that can take effect during your lifetime, during periods of incapacity, and after death. A Trust involves:
- A trustmaker (the person creating the trust)
- A trustee (the person or institution managing the trust)
- Beneficiaries (the people who receive the benefits of the trust)
- Many people use a revocable living trust because it allows them to stay in control of their assets while they are alive and capable. Assets placed in a trust are often distributed outside of probate.
Living trusts have gained lots of traction as the cornerstone of comprehensive estate plans because of their comparative advantages to wills: assets in trusts remain private, bypass the public process of probate, and can be received by beneficiaries quickly upon the death of the trust’s grantor. Crucially, a well-written living trust can encompass arrangements for potential incapacity, allowing a named successor trustee to immediately manage finances if the grantor becomes unable to do so. This makes trusts very useful given longevity trends.
What Is A Pour-Over Will?
Attorneys typically advise families to add a “pour-over will” to their estate plan, in tandem with a trust. As Kyle Krull of Harvest Law explains, a pour-over will serves as a “safety net,” ensuring that all assets are ultimately distributed based on the specifications laid out in the trust document:
A pour-over will …designates your trust as the beneficiary of your probate estate.
When assets are forgotten or are left out due to a lack of time to transfer them before you die, the trustee will be able to gather those assets into the trust. Pour-over wills allow for the trust to singularly control the who, when, and how of inheritances … .If you have a revocable living trust-based estate plan, you should also have a pour-over will. This tool is beneficial when you expect new inheritances or accounts to be left to you, or when you hold property in multiple locations. It is also helpful when you have arranged for a trustee to implement spendthrift protections, manage funds for minors, and stage distributions. You also need a pour-over will to nominate guardians (i.e., back-up parents) for any minor children should they ever be orphaned.
Designating Fiduciaries for The Estate Plan: Executors and Trustees
The appointment of the individuals who must ultimately carry out the plans made through wills and trusts is an important and sometimes overlooked aspect of estate planning. It’s wise to make this decision carefully, and to ensure designees have the information, time and ability to carry out the intentions spelled out in a will and or trust. At Trust & Will, attorney Craig Parker offers these tips related to the selection of an executor and trustee for a pour-over will and trust:
- The Executor of a Pour-Over Will is the person who will carry out the duties specified in the document. In many cases, this means arranging for the cremation or burial, organizing the funeral or memorial ceremony, filing final tax paperwork, and transferring assets into the Living Trust. The Executor will also handle any other necessary administrative affairs.
- The Trustee, who is named when the Living Trust is created, will manage the distribution of assets within the Trust as specified. In some cases, the Executor and the Trustee will be the same person but not always. For example, parents may place one child in charge of each role or some other arrangement. It is recommended that the Trustee and Executor are aware of each other’s responsibilities, and that they understand they will be working together in the future.
Attorneys explain that individuals appointed as executors and trustees “owe a fiduciary duty to the estate and its beneficiaries,” and must therefore act in the best interests of both. Given the legally binding obligations of executors and trustees, fiduciary bonds can be required. Essentially, executor and trustee bonds guarantee that the individuals will adhere to the law when carrying out their duties. More Information about executor bonds and trustee bonds for every state in the country, as well as an easy online service for obtaining these and other fiduciary bonds quickly and efficiently, is available at Colonial Surety Company:
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