What is the Difference Between a Will & Trust?

Share Post: facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.

Published by Beth Schanou, Director of Wealth & Estate Planning

Estate plans can be structured differently depending on a person’s situation and intentions.  What is the difference between a will and a trust? A will and a trust are separate documents to pass assets to heirs after death, but they are administered differently and have varying advantages. When you boil it down, both a will and trust are a set of instructions, but choosing which document should be the centerpiece of an estate plan requires some thought.

Most people are familiar with a will but get confused when a trust is introduced because a trust can be created within a will (testamentary trust) or in a standalone document (inter vivos trust). For purposes of this, I am referring to an inter vivos trust. Such a trust can achieve many of the same things a will does and is used in conjunction with a will. If a person wishes to use a trust as the centerpiece of their plan, the purpose of their will changes and takes a backseat to the trust. This is when the will is called a pourover will because it simply pours over any assets to the trust not funded to the trust during the person’s lifetime.

Wills and trusts are administered differently even though they may include many of the same provisions. A will must be admitted to probate before administration can begin, and the estate is closed once all the statutory requirements are met. Alternatively, the successor trustee can administer a trust through a less formal process. So what about the pourover will accompanying the trust? It is a necessary back-up to transfer assets to the trust which were not funded to it during the person’s lifetime or through a beneficiary or Pay on Death (POD) designation. Typically, the goal is for the pourover will to remain unused. In order for the goal to be achieved, there can be no assets titled to the person’s individual name or assets lacking a beneficiary designation of someone other than the estate. In other words, all assets should be titled to the trust or payable to the trust or other beneficiary.

An estate plan with a will is usually cheaper to implement than a plan with a trust but requires some work and expense on the back-end to administer the estate. If avoiding probate is desired, a trust might be used, and assets should be funded to or payable upon death to the trust to ease in post-death administration. Other considerations in determining which structure may be more appropriate include:

  • Number of states in which real estate is owned
  • Whether there are minor children
  • Desire for private administration
  • Commitment to making titling changes
  • If the marriage is not the first for each spouse or there are children from a prior marriage

We recommend engaging an estate planning attorney to navigate through the decisions required in creating an estate plan. The attorney can provide guidance in properly structuring the plan depending on each person’s goals and intentions.

Share:
facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.
Share Post: facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.

RECENT POSTS

Applying for College Financial Aid

Published by Beth Schanou  Now that January has arrived, those with college aged students are faced with the task of completing the Free Application for Federal Student Aid (FAFSA). The FAFSA data gives a student access to financial aid and many states and colleges (public and private) use …

If It Walks Like a Duck and Talks Like a Duck, It Might Be a Bargain

Published by Rob Furlong A couple weeks ago, Heisman trophy winner Marcus Mariota led his team, the University of Oregon Ducks, to the National Championship game. During his three years as the team’s starting quarterback, he has accumulated impressive stats culminating in a senior year wher …

Qualified vs. Non-Qualified – I Don’t Get It?!

Published by Teresa Milner If you’ve ever engaged in a conversation about retirement and you heard the terminology of qualified vs. non-qualified but you had no clue what that meant – know you’re not alone! The following is a basic explanation of the difference:

Rising Interest Rates & Financial Stocks

Rising interest rates have many implications for the economy and therefore the stock market. Many feel the Fed will begin increasing the Fed Funds Rate – the rate at which banks lend to each other, sometime this year. On a standalone basis, rising rates have the potential to be very benefic …

1 2 3 87 88 89 90 91 92

Get in Touch

In just 15 minutes we can get to know your situation, then connect you with an advisor committed to helping you pursue true wealth.

Schedule a Consultation