Do you know the difference between a will and a trust?

You’ve probably heard these terms but do you know what sets them apart and whether you need to have both? As we mentioned before, your will is a part of your estate plan. The same can be said for the trust, but each of them serve different purposes.

What Is a Will?
A will can be defined as a document in which you state your wishes and decide how your property will be distributed after you die.  The will is revocable and you are able to alter it at any time prior to your death. It’s always very important to review your will periodically and especially in the event of a major life event, such as marriage or divorce.

What Is a Living Trust?
Unlike a will, a trust or living trust not only specifies what’s to be done with your property after your death but how it should be dealt with during your lifetime as well. You’re able to appoint a trustee and, in the case of disability or illness, this person will be able to manage your property.

Perhaps the most important attribute of living trusts is that your estate will usually not need to go through probate. A caveat is that you must be careful to have everything accounted for in the trust or that portion of the estate will still require probate. Be sure to look into using a ‘pour-over’ will to direct any external assets into the trust in the event of your death.

What is the difference?
The easiest way to explain the difference is to show you what it is included in each. We found a great comparison from Nolo.

Do you need only one or both?
Each and every case should be looked at individually hence the best advice is to discuss it with your estate planning attorney.

By establishing a trust you can avoid probate. You can learn more about probate here. Having a trust is also a good idea when you have minor children because a trust allows you to establish provisions specifying when a child will be entitled to any assets held in trust.

You can set up a trust with tax planning provisions if your estate exceeds the current estate tax threshold. You can find your state`s current estate tax here.

Whether you have a will, a trust, or both, don`t forget that you can safely store them in so your family can find them when they most need your vital information.

Disclaimer: We are not lawyers. Please talk to your lawyer if you have any questions or doubts about your situation.