Why You Need Both a Will and a Trust
One of the biggest estate planning myths that we hear all the time in our office is that a last will and testament and a revocable trust are interchangeable. The main difference between a trust and a last will and testament is how your assets are retitled after you pass away. This article explains why you need both a will and a trust and how the document differences help preserve your assets for the next generation.
What is a Last Will and Testament?
A last will and testament, commonly known as a will, is a legal document that outlines how a person's assets and property should be distributed after their death. It allows an individual to specify who they want to inherit their property, and in what proportion, as well as any specific instructions for the distribution of assets. The will may also appoint an executor, who is responsible for managing the estate and ensuring that the instructions in the will are carried out. A will can also include other important information, such as naming guardians of minor children.
To be considered legally binding, a will must meet certain requirements, which can vary depending on the jurisdiction in which it was created. It is generally recommended that individuals consult with a lawyer when creating a will to ensure that it is valid and meets their specific needs.
What is the Difference Between a Last Will and Testament and a Trust?
The most important difference between a will and a trust is the distribution of your assets after you pass away. If you have only a will, court supervision is required to prove the validity of the will. This process is known as probate. A trust, by contrast, automatically transfers assets to your beneficiaries upon your death. Avoiding the need for probate court protects the privacy of your wishes and saves your heirs time and money.
A will is a relatively simple legal document that sets forth your wishes regarding the distribution of your tangible personal property at death. Imagine if you could pick up your house in your hand and turn it upside down. Everything that would fall to the ground, your jewelry, your baseball card collection, your toaster, is considered your tangible personal property.
By contrast, a trust is a more complicated legal document. A trust protects any assets that are titled in the name of the trust. This can include your house and your bank accounts, which are automatically retitled into the name of your beneficiary upon your death. This is why a trust likely prevents the need for probate court.
Why Do I Need Both?
Often clients ask, “If a trust is more effective in transferring my assets, why do I need both?” A will and a trust go hand in hand. A peanut butter sandwich is good, and a jelly sandwich is okay, but neither is as good as a PB&J. While they are different, they complement each other to make a complete sandwich, the same is true for your estate plan.
What if I Only Have a Will?
As mentioned above, if you only have a will, your family may have to go through the complicated and costly process of probate. However, this is not the only benefit to having a trust. A trust can include provisions to care for your estate in the event you are incapacitated. For example, if you were to experience a catastrophic medical event, such as a stroke, your family may need to sell your house to afford assisted living. If your house is titled in the name of your trust, your trustee can sell the home and use the money for your care. This would be impossible if you only had a will because you are still alive.
What if I Only Have a Trust?
Wills provide clear instructions for the distribution of your personal property which can curb family conflict. Moreover, a will can name guardians for minor children in the event you pass away. This prevents the need for a family member to go to court to gain guardianship and ensures the care and financial protection of your children. Moreover, even if you have a trust, you should still have a will for any assets that the trust does not cover. A pour-over clause in the will can save the day when the creator of a trust neglects to or improperly transfers all of their property into the trust. It is important to remember probate will come out of the shadows if your assets aren’t properly transferred into the trust or your trust isn’t properly funded.
We’re Here to Help
We tell clients all the time that a will is not enough to avoid probate, but don’t think you can get by with just a trust. The trust and will go together like PB&J. Wills and trusts are both important ingredients in your comprehensive estate plan. If you want to learn more about the difference between wills and trusts, you can schedule a Free Personal Family Legal Session and meet with a Rilus Law attorney.