What Is the Difference Between a Will and a Trust?
Wealth & Estate Planning Partner Erika Apelis discusses one of the most commonly misunderstood estate planning topics: the difference between a Will and a Trust. As she frequently explains to clients, the difference is not just the cost, but the capability of each document.
What Is a Will?
A will is a document that names beneficiaries of assets upon your death. A will only takes effect upon your death.
What Are the Limitations of a Will?
- A will only disposes of assets in the individual’s name alone.
- A will does not transfer assets that are jointly titled, that have a beneficiary designation, or titled in the name of a trust.
What Happens if I Do Not Have a Will?
If you do not have a will, your assets will pass by the laws of intestate succession where you passed away or owned property. These laws differ state to state and may not be the same as your wishes.
For example, if you are married with three children from that marriage you spouse would receive everything. If you wish to provide for your children as well, you would need a will to do so.
The Administrator of your estate may also need to post bond or insurance before the probate court will appoint your loved one. This delays the administration process and is an added cost for your loved ones.
What Is a Trust?
In its most simple form, a trust is a way of holding property that involves three parties – a Grantor (also called a Trustor or Settlor), Trustee and Beneficiary.
A trust can be revocable or irrevocable, meaning it can either be revoked or not.
What Are the Limitations of a Trust?
There really are no limitations and a trust can be as flexible or inflexible as you want.
How Do Assets Distribute With a Trust?
If a trust is properly funded, you can avoid the probate court process entirely. This means all your assets remain private and are not disclosed on the probate court docket.
What Are the Benefits of a Trust?
- Your assets remain private.
- There is no delay in administering your assets after your death.
- Your Trustee can immediately begin to administer your trust and make any necessary distributions.
- A Trust allows an individual to control the distributions of their assets after death.
If you have any questions about wills or trusts, or planning for your future in general, please contact Erika Apelis at 216.978.5353 or efa@kjk.com.