What is the difference between a will and a trust?

Some people think wills and trusts are interchangeable. They are not. Both can be effective to transfer assets to loved ones after your death. But they have important differences.

 

A will “speaks at death,” its provisions are not effective until death. A will is only effective to transfer “probate” property at your death. Probate property is the property you own at death like a bank account or auto that is titled in your name only. A will is also the only document that can tell the probate court who you want to be guardian of your minor child. A will does not transfer property that is not probate property. The will describes who you want to gather your probate property, pay your liabilities and then distribute what is left to the beneficiaries you describe.

 

By comparison, a trust comes into existence and is effective when you sign it. You transfer your property into the trust when you create it. That is called “funding” the trust. Your trust holds title to the property transferred into it. If property is in a living trust, it will not be governed by the will because it no longer is in your name—it is in the name of the trust. The trust describes who you want to manage the property in your trust during your life, after a disability, and after death. The trust describes how you want the property managed and when you want it to be used for your beneficiaries. You can be your own trustee during your lifetime.

 

The unique characteristics of legal documents may not be obvious. We are happy to help you learn and understand the differences.