Is there a difference between a will and a trust?

Each document is actually very different in how it works, though they can accomplish similar things. Both contain instructions for when you pass away. However, how this is accomplished is very different. With a will, your instructions are carried out by a person you appoint as an executor (or personal representative in some states). Wills usually have to go through probate, or the court process required when someone dies. With a trust, your instructions are carried out through a trustee that you appoint, usually without the lengthy probate process needed when property is distributed with a will.

What’s a trust?

A trust is an entity recognized by the law, designed to hold your assets. When your trust is created, assets that you choose like your home, vehicles, bank/investment accounts, etc., are transferred to the trust. Don’t worry, you still get to use and enjoy these things, but legal title to them is in the trust, which you control. The trust can offer some protection of the property during your life and then can transfer the property to those you designate when you and your spouse pass away. Unlike a will, which has significant limitations on distributing property, a trust can put conditions, terms, or timelines on how your property passes to those you designate as a beneficiary.

What are the benefits of a trust over just a will?

Because a trust “owns” the property you put into it, under the law, you do not own it and when you pass away, that property bypasses probate. Trusts are also administered privately most of the time, whereas the probate of a will is a public record. This means when your will is probated, some of your private information could be out in the open. Trusts also offer some protection of the property transferred to the trust.

Trusts are also a great tool when planning for beneficiaries with special needs, such as those with mental disabilities, kids who make poor choices, or those who might have creditor problems.

Aren’t trusts expensive and only for wealthy people?

Trusts are generally a bit more expensive then wills to set up. However, because trusts can bypass probate and other costly court proceedings, they will save you and your heirs thousands of dollars in the long run.

And, it’s true, wealthy people can and do use trusts very effectively in their estate plan. But, they’re not just for those with a lot of wealth! Us mere mortals can benefit from them too!