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What's the Difference Between a Will and a Trust?

A Will takes effect after its writer (the “Testator”) dies and after the Will is filed in court and accepted by the court.  At that time, the probate process begins.  Probate is the process of paying your debts and distributing your assets after your death.  The person appointed by the court to oversee this process is your “Executor” (sometimes called the “Personal Representative”), and most often the court will appoint the person you chose to serve in this role, as stated in your Will.  Your Executor’s duties include paying debts, filing taxes, transferring assets to your named heirs, selling property (and then transferring the proceeds to your named heirs), etc.  This can be a lengthy process, as it is supervise by the court. The length of time will differ by the size and complexity of the estate left, as well as the court process.  In some states, and in some counties, the courts are faster, while in others they are far slower.  But just for an example, let’s look at Texas:  “For a simple estate, the entire probate process can be completed within six months. However, expect probate to go on for a year or more if the original will cannot be located or the will is contested. This makes procedures more complicated and will take more time due to the increased involvement and supervision by the court” (“Texas Probate Guide,” https://www.forbeslawoffice.com/probate/texas-probate-guide/ ). 

Smaller estates can avoid many of the complexities of probate and be administered under simplified rules. But each state has its own figure for what qualifies as a smaller estate.  You can look up the state-by-state amount and other rules at https://www.nolo.com/legal-encyclopedia/free-books/avoid-probate-book/chapter8-2.html.

But not all of a deceased’s assets require probate.  Some assets are transferred automatically, by law, upon death.  Assets are transferred without Probate via a Trust (which is discussed below), or through joint ownership with a right of survivorship (often known as “Joint Tenants” or just “JT”), or by direct payments to named beneficiaries from insurance policies, retirement accounts, and pension plans. 

Two things that will slow down the probate process are: (1) If the Will cannot be located and/or (2) the Will is contested.  FamilyAndHeirs.com can help the heirs locate the Will, but only if the Will's maker opened and maintained an account at www.familyandheirs.com .  If an account was maintained at Family And Heirs, the heirs will learn how to locate the Will and the date of the current version.  Without FamilyAndHeirs.com, the heirs may not find the Will, or may find only an earlier version (which no longer reflects the Testator’s current wishes) and submit that earlier version to probate.  As for whether a Will may be contested, there are generally three reasons: (1) greed;  (2) an honest belief that the Testator wanted a different distribution of the assets than the one contemplated by the Executor; (3) a legal argument that somehow the distribution plan provided in the Will is unlawful or that it unlawfully or improperly excludes someone.  But in these situations, having an account on www.familyandheirs.com may help.  In many estates, there is absolutely nothing to show the deceased’s wishes except the Will, so if anything is unstated or unclear, there is little if anything to demonstrate to the court what the deceased really wanted. All you have in these cases is competing testimony (for instance, a daughter who says, “Mom promised the house to me,” and a son who says, “She said no such thing.”  Both may be telling the truth as they know it.)  But if the deceased (the Testator) had an account on FamilyAndHeirs.com and filled in all the information, and uploaded documents concerning his or her wishes, there will be a further basis for understanding and interpreting the Will, which may (1) help the court to determine the Testator’s actual wishes, or (2) even better, help the heirs understand what the Testator wanted and thus avoid the dispute. 

A Trust takes effect immediately upon being set up, that is, it is entirely effective during the life of the person (who is known as the “Grantor”).  In the Trust document, the Grantor names the Trustee or Trustees, who will manage the Trust.  Generally, Trusts are “Revocable Trusts,” which means that at any time during the Grantor’s life, he or she can change anything or entirely revoke the trust.  (Some Trusts are made as “Irrevocable Trusts,” which means they generally cannot be undone, but these are unusual, and substantial legal and accounting and tax advice goes into a decision to create an Irrevocable Trust.)  When a Trust document is signed, the Grantor transfers his or her assets into the Trust.   So, for instance, Jane Doe’s house, previously titled as being owned by “Jane Doe, a single woman,” is transferred to her Trust and the title reads, “Jane Doe Living Trust UAD [Under Agreement Dated] January 15, 2021.”  Likewise, Jane Doe will also transfer her bank accounts and her stock accounts, etc., into her Trust.  This process is known as “funding the trust.”  Most such Trusts are known as Living Trusts (also called an "inter vivos" trust). because they are created while the Grantor is alive.  (A Trust created after the person is deceased is known as a Testamentary Trust.  These are generally created by the Executor during the probate process, in accordance with the deceased’s instructions in his or her Will.)   (Do not confuse a “Living Trust”  with a “Living Will.”  A “Living Will” is a document that describes your wishes for how medical decisions should be made in life-threatening situations.)

As stated, the Trust is managed by a Trustee or Trustees.  Most often, the Grantor (of a Revocable Trust) names himself or herself as the sole Trustee, so that for so long as he or she remains alive and competent, they get to manage all their own assets.  But the beauty of the Trust is that the Grantor also names a Successor Trustee (or Successor Trustees) who take over instantly and automatically upon the Grantor’s death.  The Successor Trustee or Trustees may be a relative or relatives or may be a professional trustee (often from a financial institution), who then begin to manage the Grantor’s estate, and the end-goal in the management process is distributing the assets in accordance with the Grantor’s instructions as stated in the Trust documents.  

A Living Trust avoids the probate process, but it does not avoid legal and accounting fees.  In simple cases the Successor Trustee(s) can get all the assets transferred to the Grantor’s beneficiaries within a few weeks.

So, it might appear that for most people a Living Trust makes more sense than a Will.  But as AARP asks, “The question for you is whether probate is worth avoiding. Many states have streamlined, simplified procedures for uncontested wills. They also have low-cost ways to probate modest estates.… There's no probate at all for retirement accounts with named beneficiaries, joint accounts with survivorship rights, pay-on-death accounts and life insurance. If these types of assets make up the bulk of your estate, a will works fine” (https://www.aarp.org/money/budgeting-saving/info-2019/living-trust-uses.html ).  Trusts require substantial extra paperwork because assets must be transferred into the Trust’s name, and thereafter the Grantor, as the original Trustee, must manage his or her assets as Trust assets.  On the other hand, probate can be expensive (some states allow a certain percentage of the probated estate to the attorney and to the Executor), and if you own property in more than one state, you may encounter “double probate.”

So which should you choose: a Will or a Trust? Suze Orman says, “It is my strong opinion that you should have both a will and a living revocable trust.”  In her view, 

“As important as a trust is, you also want to have a will.  While your big-ticket assets, such as a home, should be owned by your trust, you likely have other smaller keepsakes – a china collection, watches etc. – that you want to give to a specific person. A will is where you spell this out.A will is also where you can write down your funeral wishes.  If you have young children you must, must, must have a will.  A will is where you appoint a guardian for minor children.  I realize thinking about this can be upsetting, but let’s talk about something even more upsetting: if you die without a will that establishes your children’s’ guardians, decisions about the care of your kids are going to fall to the court system. That’s what happens when parents die without a legal guardian ready to step in.  Sure, a sibling or cousin or dear friend might end up as the guardian, but only after a draining court process, and potentially ongoing court oversight. You love your family more than anything, right? Having both a will and a trust is a powerful way you show your love. It will save your family time and money. And the heartache of squabbles if you were to die and not leave clear instructions on who is to get what.”

(source:  https://www.suzeorman.com/blog/The-Difference-Between-a-Will-and-a-Trust

How should you decide? Visit a competent Estate Lawyer. Everyone’s situation is different, and in this short blog we can’t even attempt to give a thorough discussion of the complexities involved.  No one at FamilyAndHeirs.com practices estate law or writes Wills or Trusts.  We provide no specific advice or generally-applicable legal advice.  What we wish to do here is to show you some of the issues and complexities so that you will appreciate the need to visit an attorney to discuss your particular situation.

But, of course, on FamilyAndHeirs.com, we treat both Wills and Trusts similarly.  Your account set-up process will be the same without regard to whether you have a Will or a Trust or both, and you will answer the same pre-planning questions and upload your documents.  So while there is substantial differences between Wills and Trusts, for the purposes of your account on www.familyandheirs.com the registration process is identical. 

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