If you have thought at all about your estate plan, you know that a will and a trust are two of your options. However, many clients want to know, what’s the difference between a will and a trust? Although a will and a trust are both very helpful estate planning tools, they do have different characteristics and their purposes are not the same. Nevertheless, as our Overland Park estate planning attorneys agree, both of these tools can be used together to create an effective estate plan.
Our Overland Park estate planning attorneys suggest you plan ahead
Planning ahead is crucial for everyone and there are many reasons that is so. Having an appropriate estate plan gives you the ability to decide ahead of time how you want your property to be distributed after your death. It also allows you to take steps to reduce estate taxes and probate expenses as much as possible. Additionally, if you ever become incapacitated in any way, even temporarily, having an estate plan prepares your family for the need to take over your personal, financial, and medical affairs.
What is the difference between a will and a trust?
Simply put, the primary goal of a will is to distribute your estate, the primary goals of a trust are to reduce estate taxes and avoid probate whenever possible.
The last will and testament is essentially a written legal document that explains to those who survive you precisely how you want your estate to be distributed upon your death. Wills are very effective estate planning tools because they can be modified or revoked at any time before your death or before you are deemed incapacitated.
A trust, on the other hand, is a fiduciary agreement based on confidence and trust. The trust agreement is made between two parties for the benefit of a third. A trust agreement basically gives the trustee the authority to retain and manage the trust assets for the benefit of beneficiaries you name. The trust agreement will also provide detailed instructions regarding how to manage and distribute your trust property.
Trusts and wills become effective under different circumstances
One of the primary differences between a will and a trust is that a will only becomes effective after your death. On the contrary, unless you specify otherwise, a trust takes effect as soon as it has been executed. Put another way, a will determines who will receive your property after your death, but a trust can begin distributing property before your death or after your death – whichever you choose.
The beneficiaries of a will and a trust are somewhat different
A will allows you to name as many different beneficiaries as you choose, or to name only one if that is your desire. The beneficiaries of a will can inherit any type of property you designate. A trust, on the other hand, basically has two types of beneficiaries. One type of beneficiary receives the income from the trust and the other type will receive the remaining assets after certain other conditions have been met.
The property controlled by a will or trust may be different
Generally speaking, the last will and testament controls the property that is in your name alone at the time of your death, but only the property that you specifically identify in the terms of the will. Any other property that is not mentioned in a will is controlled the by the laws of intestate succession. The trust, however, will only pertain to the property that has been transferred or “funded” to the trust. Therefore, in order for a specific asset to be included as trust property, the title of that property must be transferred to the name of the trust account.
Trusts can help you avoid probate but wills cannot
One other important difference between a trust and a will is that the property in a trust can avoid probate, but the property covered by a will must go through probate. Essentially, the probate court must supervise the administration of a will after determining that the will is valid. The court, through the efforts of the executor of the will, ensures that the estate property is distributed based on the wishes of the deceased. On the other hand, the trust property is transferred outside of the probate process, which means the court is not required to manage the process. For this reason, trusts can save time and money.
If you have questions regarding wills and trusts or any other estate planning matters, please contact the experienced attorneys at Gaughan & Connealy for a consultation. You can contact us either online or by calling us at (913) 262-2000. We are here to help!