This is one of the most common questions I receive as an estate planning attorney: what is the difference between a will and a trust? Many people have heard of wills and trusts, but not as many people know what exactly a will or a trust is, much less the differences between the two. This post will explain the similarities and differences between a trust and a will, and how we can help you choose the right one for your estate planning goals.
How Are Wills and Trusts Similar?
Disposition of One's Assets.Wills and trusts are two of the most common estate planning tools for directing the disposition of one's assets after his or her death. In other words, your will and/or trust designates who should get your stuff after you die. You can use either a will or a trust to document your wishes, whether you want your assets to go to your children, to charity, or to your beloved pet cat. This avoids having your assets distributed according to the terms of the California Probate Code.
Personal Representative.Both a will and a trust should also name a personal representative to manage your estate and facilitate the distribution of your assets as outlined in the document(s).
- The personal representative of a will is called an executor.
- The personal representative of a trust is called a trustee.
Despite the differences in names, the primary tasks of both executors and trustees are the same: manage the estate and distribute assets to beneficiaries.
Revocable Documents. Another similarity between wills and trusts are that they are revocable documents. This means that while the creator of the will or trust is still alive, he or she may change the terms of the document or even revoke it altogether. Therefore, both a will and a trust can be adapted to fit the creator's changing life circumstances.
(Note: The use of the standalone term “trust” in this post, and in standard estate-planning dialogue, refers to a revocable, or living, trust. There are other types of trusts that are irrevocable, but those are less common and outside the scope of this post.)
How Do Wills and Trusts Differ?
Testamentary vs. Inter Vivos. One of the primary differences is when the document takes effect:
- A will is a testamentaryinstrument, which means that it only goes into effect upon the creator's death.
- A trust is an inter vivosinstrument, which means that it takes effect upon creation, while the creator is still alive.
Thus, in the event the creator of the trust is still alive but incapacitated and unable to make decisions for him or herself, a trust can provide direction for a successor trustee. A will does not provide any direction in such a situation because the creator of the will is still alive, so the will is not in effect.
Will = Probate.Another difference between a will and a trust is that a will must go through probate, while a trust may be administered privately, without the court's involvement. Cases in the probate court are matters of public record, so there is little privacy regarding the terms of the will and the distribution process. Trust administration, on the other hand, can typically be completed privately amongst the successor trustee, trust beneficiaries, and other necessary parties to the administration. Trust administration is also usually much cheaper than administering a will through the probate court.
Cost and Ease of Creation.Cost to create and ease of creation are where wills have the upper hand. Wills are simpler documents and are therefore almost always cheaper and easier to create. Trusts are more complex and thus take a little more time and money up front.
Which One Should You Choose?
There's no one-size-fits-all option here. What works best for one person's situation is not necessarily the best option for another. This is why we start with an initial consultation meeting with our clients. During your consultation, your attorney will ask questions to get to know you and your estate planning goals. Then, your attorney will explain whether a will or a trust (or maybe both!) can best help you meet those goals.
We know that there are usually many factors at play: family dynamics, finances, and flexibility for the future are just a few of the aspects that might affect your decisions. We will work with you to ensure we meet your individual needs while providing peace of mind and protection for your assets and your family.
Call the Law Offices of Thomas E. Malley today at 805-482-2199 or email us at [email protected] to schedule a free consultation with one of our attorneys to discuss your estate planning needs.