Trusts & Estates

The Differences Between a Trust and a Last Will and Testament

Financial Advisor Talking about when do you need a trust vs a will Senior Couple At Home

Most people have heard the terms “trust” and “will” but cannot always define the differences. The two documents serve different purposes but can work together to create a complete estate plan. A will is governed by probate law. A trust is governed by contract law. Each document has its advantages and disadvantages. So when exactly do you need a Trust vs. a Will?

Trusts vs. Wills

They Have Different Effective Dates

A will is not in effect until you die. A trust, conversely, is effective once executed and funded with assets. A trust can be used during your lifetime for specific purposes, including ensuring you are financially secure during a disability or legal incapacity.

They Have Different Probate Requirements

The property subject to your last will and testament passes through probate. That means a court oversees the administration of the will. The court also ensures that your will was properly executed and  is valid. Finally, the court requires that your executor or personal representative file documents, such as inventories and accountings, to ensure that your property is being distributed in accordance with your will.

A trust passes outside of probate, so a court will not oversee the process, which can save time and money. Unlike a will, which becomes part of the public record, a trust can remain private.

They Have Different Tax Requirements

A will cannot protect your assets from an estate tax. If your estate exceeds a certain threshold, a trust may be able to create certain tax advantages.

They Have Different Out of State Property Ownership Requirements

If you own real estate in more than one state, a trust will help you avoid opening probate matters in each of those states. Ancillary probate estates can be costly and cumbersome. By drafting a trust and transferring all of your real estate into that trust, your trustee avoids having to probate real property in multiple states.

Speaking with an estate planning attorney at Poole Brooke Plumlee PC can help you decide whether a will or a trust is right for you. Make your appointment today.

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