Wills and Trusts: Estate Planning with Wills and Trusts
You’ve probably heard of wills and trusts, but not everyone knows the differences between the two. Both are useful estate planning documents that serve very different roles. They can work together to create an estate plan.
What is a Will? What is a Trust?
The main difference between a will and a trust is that a will goes into effect only after you die, while a trust takes effect as soon as you create it. A will is a document that sets out who will get your property at your death, and it should name an executor to carry out your wishes. A trust can be used to begin distributing property before death, at death or afterwards. A trust is a legal arrangement where one person (or an institution, such as a bank or law firm), called a “trustee,” owns property for another person, called a “beneficiary.” A trust usually has two different kinds of beneficiaries – a group that benefits from, and can utilize the income from the trust during their lives and a second group that gets whatever is left over after the last of the initial group of beneficiaries dies.
Wills dispose of any property that is solely in your name when you die. It does not distribute property held in joint tenancy or in a trust. A trust, on the other hand, deals only with property that has been transferred to the trust. In order for property to be included in a trust, it must be owned in the name of the trust.
Another difference between the two is that the property distributed pursuant to a will goes through the Probate Court and process. The Probate Court oversees the administration of the will, ensures it is valid and the property gets distributed the way the deceased wanted. A trust passes outside of probate, so a court does not need to oversee the process, which can save time and money. Unlike a will, which becomes part of the public record, a trust can remain private. However, the creation and proper maintenance of a trust can be much more expensive.
Wills and trusts have their advantages and disadvantages. For example, a will allows you to name a guardian for children and to specify funeral arrangements, while a trust does not. On the other hand, a trust can be used to plan for disability or to provide savings on inheritance or estate taxes.
We can offer you guidance and planning on how best to use a will or a trust in your estate plan. Contact us to get started.
Thomas Babson Kane is an attorney in Glastonbury, CT, specializing in Estate Planning and Real Estate law.