What is the difference between a Will and a Living Trust? Everyone has heard the terms “will” and “trust,” but not everyone knows the differences between a will and a living trust. Both are useful estate planning devices that serve different purposes and both can work together to create a complete estate plan.
One main difference between a will and a trust is that a will goes into effect only after you die, while a trust takes effect as soon as you create it. A will is a document that directs who will receive your property at your death and it appoints a legal representative to carry out your wishes. By contrast, a trust can be used to begin distributing property before death, at death or afterwards. A trust is a legal arrangement through which one person, or an institution , bank or law firm, called a “trustee”, holds legal title to property for another person, called a “beneficiary.” A trust usually has two types of beneficiaries – one set that receives income from the trust during their lives and another set that receives whatever is left over after the first set of beneficiaries dies. A will covers any property that is only in your name when you die. It does not cover property held in joint tenancy or in a trust. A trust, on the other hand, covers only property that has been transferred onto the trust. In order for property to be included in a trust, it must be put in the name of the trust.Another difference between a will and a trust is that a will passes through probate. That means a court oversees the administration of the will and ensures the will is valid and the property gets distributed the way the deceased wanted. A trust passes outside of probate, so a court does not need to oversee the process, which can save time and money. Unlike a will, which becomes a part of the public record, a trust can remain private.