Differences between Will and Trust

Will and Trust are estate planning tools used to distribute assets and property after a person’s death, but they have distinct differences. A legal document that specifies how a person’s assets and property should be distributed after their death is known as a Will, whereas a legal arrangement in which one party (the trustor or settlor) transfers ownership of assets to another party (the trustee) to hold and manage for the benefit of a third party (the beneficiary) is known as a Trust.

What is Will?

A will, also known as a last will and testament, is a legal document that outlines how a person’s assets and property should be distributed after their death. It allows individuals to specify their wishes regarding the distribution of their estate, appoint guardians for minor children, and name an executor to oversee the administration of the estate.

Features of a Will are:

• Identification of Beneficiaries: The will identifies the individuals or organizations (beneficiaries) who will inherit the testator’s assets and property.
• Appointment of Executor: The testator appoints an executor, also known as a personal representative, to carry out the instructions outlined in the will. The executor is responsible for managing the estate, paying debts and taxes, and distributing assets to beneficiaries.
• Distribution of Assets: The will specifies how the testator’s assets and property should be distributed among the beneficiaries. This may include specific bequests (e.g., a particular piece of property or a sum of money) as well as instructions for the distribution of the remainder of the estate (residuary estate).

What is Trust?

A trust is a legal arrangement in which one party, known as the trustor, settlor, or grantor, transfers ownership of assets to another party, known as the trustee, to manage those assets on behalf of a third party, known as the beneficiary. Trusts are commonly used in estate planning to manage and distribute assets, provide for beneficiaries, and minimize estate taxes.

Features of a Trust are:

• Trustor/Settlor/Grantor: The person who creates the trust and transfers assets into it. The trustor determines the terms and conditions of the trust and specifies how the assets should be managed and distributed.
• Trustee: The person or entity responsible for managing the assets held in the trust and carrying out the instructions outlined in the trust document. Trustees have a fiduciary duty to act in the best interests of the beneficiaries and to administer the trust in accordance with the trustor’s wishes.
• Beneficiary: The person or entity who benefits from the assets held in the trust. Beneficiaries may receive income generated by the trust assets, distributions of principal, or other benefits specified in the trust document.

Difference between Will and Trust

Basis	Will	Trust
Meaning	A will, also known as a last will and testament, is a legal document that outlines how a person’s assets and property should be distributed after their death.	A trust is a legal arrangement in which one party, known as the trustor, settlor, or grantor, transfers ownership of assets to another party, known as the trustee, to manage those assets on behalf of a third party, known as the beneficiary.
Creation and Functionality	It takes effect only upon the death of the person (testator) who created it.	Trusts can be created during the grantor’s lifetime (living trust) or established through a will (testamentary trust). Trusts can be revocable or irrevocable and can provide more control over the management and distribution of assets.
Minor	A will can also appoint guardians for minor children, specify funeral arrangements, and name an executor to oversee the distribution of assets.	A trust doses not appoint guardians for minor children.
Probate	Assets distributed through a will typically go through the probate process, which is a court-supervised process of validating the will, paying debts, and distributing assets to beneficiaries. Probate can be time-consuming and may involve court costs and legal fees.	Assets held in a trust generally avoid probate, as they are owned by the trust and not the individual. Upon the grantor’s death, the trustee can distribute assets to beneficiaries according to the terms of the trust without court involvement, saving time and expenses.
Privacy	Wills become public record during the probate process, meaning that the contents of the will, as well as the value of assets and identity of beneficiaries, can be accessed by the public.	Trusts offer greater privacy, as they do not go through probate and remain private documents. The terms of the trust, including asset distribution and beneficiary information, are typically not made public.
Flexibility and Control	Wills offer flexibility in naming beneficiaries, specifying guardianship for minor children, and appointing an executor. However, they may not provide as much control over the management and distribution of assets as trusts.	Trusts allow for more control over the management and distribution of assets, as the grantor can specify detailed instructions for how assets should be managed and distributed both during their lifetime and after their death. This can be particularly useful for individuals with complex family situations or substantial assets.
Cost	Creating a will is generally less expensive than establishing a trust. However, the costs associated with probate, including court fees and legal expenses, can add up.	Establishing a trust may involve higher upfront costs than creating a will due to legal fees and administrative expenses. However, the potential savings from avoiding probate and maintaining privacy can outweigh these initial costs for some individuals.
Attorney	Wills can be prepared without an attorney.	An attorney is required for the preparation of trust.

Will and Trust – FAQs

Do I need both a Will and a Trust?

It depends on your individual circumstances and estate planning goals. Wills and trusts serve different purposes, and some individuals may benefit from having both. A will is essential for naming guardians for minor children, appointing an executor, and specifying how assets should be distributed. Trusts offer benefits such as avoiding probate, maintaining privacy, and providing for more detailed asset management and distribution instructions.

Which assets can be included in a Trust?

Virtually any type of asset can be included in a trust, including cash, real estate, investments, business interests, life insurance policies, and personal property. The trustor can transfer assets into the trust during their lifetime or specify that certain assets should be transferred into the trust upon their death.

Can I change or revoke a Will or Trust?

Yes, both wills and trusts can typically be changed or revoked during the trustor’s lifetime. A will can be updated through the execution of a new will or through a codicil (amendment), while a trust can be amended or revoked through a trust amendment or restatement. It is essential to follow legal formalities when making changes to ensure their validity.

What happens if I die without a Will or Trust?

If you die without a will or trust, your assets will be distributed according to the intestacy laws of your state. These laws dictate how assets are distributed among surviving relatives, which may not align with your preferences. Creating a will or trust allows you to specify how your assets should be distributed and to whom.

How much does it cost to create a Will or Trust?

The cost of creating a will or trust can vary depending on factors such as the complexity of the estate, the services of legal professionals, and any additional estate planning documents required. Generally, wills are less expensive to create than trusts, but the potential savings from avoiding probate may outweigh the initial costs of establishing a trust.