“Should I get a trust?” “What’s the difference between a will and trust? Do I need one?” These are some of the most common questions I hear when planning an estate. To understand the differences and determine which is best for you, let’s look at each one in turn.
Think of a will as a set of instructions. Judge, please appoint Katherine as my Executor. Executor, please pay off my debts and funeral expenses. Executor, please deliver my real property to my brother and give the rest of my property to my Trustee, in trust, for the benefit of my minor children. Guardian, please raise and care for my minor children . . . The will is a legal document taking effect when you die and specifying whom you want to carry out your last wishes and what those wishes are. As you can see from this example, and one of the common causes for confusion, is that a will can be used to set up a trust. A trust created under a will is called a “testamentary trust” (vs. an “inter vivos trust” which is one you create while you’re alive). At the very least, a will is necessary for appointing and Executor and a Guardian for any minor children.
Think of a trust as an entity. It can own and manage property and it acts through the decisions of its agents (the trustees) for the benefit of others (the beneficiaries). It is common for the person who creates the trust (the settlor, trustor or grantor) to maintain control of the assets during his or her life, and retain the ability to modify the terms of the trust, change the beneficiaries, or even revoke the trust entirely. (If the trustor retains the ability to revoke the trust, this is known, not surprisingly, as a “Revocable Trust.”) The trust has control over only those assets owned by the trust, so adding or removing assets is another way to affect its authority.
The ability to own assets is one of the key distinguishing features of a trust and also allows the trustor to dictate the terms on which those assets are distributed. Distributions upon beneficiaries reaching a certain age are common. Distributions for a specific purpose (support or education, for example) are also frequently seen provisions. Limiting distributions for certain purposes is one of the distinguishing characteristics of a Special Needs Trust.
Because a trust is typically funded, at least in part, from the terms of a will, a will is usually a necessary estate planning piece even when a trust is involved. So the question typically isn’t “Do I need a will or trust?” it’s “I need a will . . . do I also need a trust?” Next week we’ll look at some of the factors that come into play when deciding whether a trust is right for you.
For further help distinguishing between a will and a trust or to set up an appointment and start your own estate plan, please reach out to Asurest at any time. We’ll be happy to help.
This material is intended for general information purposes only and does not constitute legal advice. Responses to inquiries, whether by email, telephone, or other means, do not constitute legal advice, nor do they create or imply the existence of an attorney-client relationship.
Disclaimer: This material is intended for general information purposes only and does not constitute legal advice. Responses to inquiries, whether by email, telephone, or other means, do not constitute legal advice, nor do they create or imply the existence of an attorney-client relationship.