Wills and trusts are two closely related but very different estate planning tools and concepts that many people confuse with each other. When embarking on estate planning, it pays knowing the key distinctions between these important instruments so you can use them to their full advantage as you draw up your end-of-life wishes.
Estate planning can be a confusing proposition especially with the breadth of its scope. In the simplest of terms, it can be described as making arrangements to remain in control of what happens to your assets when you die.
While there are many similarities between a will and a trust, there are also striking differences as to what they can do in terms of your estate plan. Among their similarities is that both documents are revocable or can be changed or cancelled at any time as long as you have the legal capacity to make such revocation. Both documents also provide you with the right and ability to name a representative or perhaps several representatives who will manage your estate in the event of your death.
Wills allow you an executor or administrator who will be responsible for controlling the estate during the probate process as well as during distribution. The term executor stems from their responsibility to execute the terms of the written will. A Will also allows you to arrange guardianship for minor children.
Trusts on the other hand allow you to appoint a successor trustee or a person who will likewise manage your estate after you’ve gone. .
Perhaps the main difference between a will and a trust is their effectiveness. Wills only take effect after the owner’s death while trusts can take effect during lifetime. This is because trusts can provide for the management and care of your assets should you become incapacitated, whereas wills only become executable after your death. Trusts also enable successor trustees to manage assets on behalf of beneficiaries who are still unable to manage their own assets responsibly, but wills offer no such provision.
