Q: What is the difference between a Will and a Trust?

A: That is an excellent question and one we get from many people. Both Wills and Trusts are documents used to direct how assets will be distributed when the maker of the Will or Trust dies.  However, a Trust can do so much more than a Will.

A person’s Will controls the distribution of his or her probate assets.  Probate assets are bank accounts, investments, real estate, tangible personal property, and other assets which are owned in a person’s individual name and which do not have a designated beneficiary.  A probate proceeding is therefore required to transfer title from the deceased to his or her heirs.  For example, a bank account in someone’s individual name which does not name a beneficiary will be a probate asset when the owner passes away. A bank account which is held jointly with another person is not a probate asset when the first joint owner dies as ownership of the account passes automatically to the surviving joint owner.  An IRA that names a beneficiary who is alive when the IRA owner dies is also not a probate asset as ownership passes automatically to the beneficiary.

A Trust controls the distribution of assets that are titled in the name of the Trust or which pay into the Trust when the Trust maker dies.  A Trust can be a valuable asset management tool for the trust maker should he experience a period of incapacity during his or her lifetime.  A Trust can be used to avoid probate when the maker of the Trust dies. This is a desirable goal since probate is usually expensive, aggravating, and time-consuming.  A Trust can be used to control the distribution of a beneficiary’s inheritance.  This is important if you have young beneficiaries, a beneficiary with disabilities, beneficiaries who are not responsible with money, or beneficiaries who have creditor issues or other troubles.  Distributing an inheritance to a beneficiary in any of those circumstances often leads to the loss of the inheritance.  A Trust can be used to protect a beneficiary’s inheritance from the beneficiary’s creditors such as a divorcing spouse, lawsuits, or bankruptcy.  A Trust is an excellent vehicle for ensuring that a beneficiary with disabilities does not lose valuable governmental benefits.  Trusts are commonly used for tax planning and to achieve planning goals for blended families.

The bottom line is that while Wills and Trusts both perform similar functions (i.e. distributing a person’s assets when they pass away), a Trust is a more efficient way to accomplish that function and has far more versatility than a Will.

To learn more about Wills and Trusts and what is right for your situation, call Jennifer Poles to make an appointment with one of our experienced estate planning attorneys.

October, 2018

© 2018 Samuel, Sayward & Baler LLC