Wills and Trusts

Wills and trusts are two different legal forms of transferring property. Because of their seemingly subtle differences, many people tend to get wills and trusts confused. Although wills and trusts are two forms of transferring property legally, their differences extend way beyond what they have in common. To diffuse some of the confusion surrounding wills and trusts, it is a good idea to find out a little more about each.

A trust is a legal entity or person that can hold title to property for the benefit of one or more other persons or entities. In the creation of a trust, there are three parties involved. These parties are the creator of the trust or the trust maker, the trustee who is responsible for the managing of the assets in the trust property (assets), and the beneficiaries who are those who will benefit from the trust property. The basic concept in trusts and wills are that property will be transferred from one party to another and that is what is happening here essentially. However, because the process and very nature of trusts and wills are so different, the advantages and disadvantages of trusts and wills will be different as well. There are two types of trusts, one being revocable and the other is irrevocable. A revocable trust is a type of trust that can be changed at any time. The terms of the trust can be modified through a trust amendment or reinstatement. Trusts and wills differ as trusts have the ability to transfer property directly from one entity to the other without having to involve the probate court. Because of this, the timely process, and legal and court fees can be avoided. Another difference between trusts and wills are that while wills are made public for anyone to search for, trusts remain private so that no one will have access to information pertaining to your estate or the parties involved in the trust. However revocable trusts are alike wills, in that the estate will remain in the trust maker’s name and will have no creditor protection. On the other hand, an irrevocable trust does offer credit protection as the estate is no longer in your full control. Because of this, many people are now using irrevocable trusts in estate planning goals. Irrevocable trusts and wills differ because in an irrevocable trust, the estate becomes the property of more than just the trust maker, making the assets unreachable by creditors and because of this, the estate cannot be taxed upon the trust maker’s death either. Irrevocable trusts can be transferred to another member of the household so that although the trust maker will no longer have complete control over the estate, they can still continue to enjoy the financial benefits of the estate. Trusts and wills differ mainly in that, trusts have a much more practical use in life than a will does (aside from a living will). In fact, wills don’t have much use in life at all, and is used only in death.

Although the basic idea of wills and trusts may be similar, the vast majority of both legal entities are completely different. Trusts and wills offer different benefits and disadvantages and one must decide upon the purpose of their transfer before deciding which method would serve them best.