Wills and trusts are important and valuable estate planning tools. They can both offer assurance that your assets will be protected and distributed according to your will to your heirs. However, despite these similarities, wills and trusts have key differences and other important functions to understand as you go about your estate planning and have these documents drafted.
What is a Will?
A will is a legal document that sets out how one wants their assets distributed after death. For example, possessions can be left and distributed among heirs, friends, and even charities. The most common type of will is a testamentary will, the traditional will that assigns specific assets to receivers and how matters are to be handled after the writer’s death. For a valid will, testamentary wills must be specific and contain language that indicates who is making the will and that the current will is to revoke any previous wills. In addition to these requirements, the will must be signed and follow any other requirements specific to the state in which the will is written and executed. Other types of wills include holographic wills and pour-over wills.
What is a Trust?
A trust is another way to transfer estate. Still, unlike a will, a trust sets forth a fiduciary relationship where one gives another party the authority to handle their assets for the benefit of the beneficiaries (aka receivers of the estate, assets, and property). There are generally two types of trusts: living trusts and testamentary trusts. A living trust is creating by the grantor during their lifetime, whereas, upon their death, the grantor’s will creates a testamentary trust. Therefore, one trust requires a will to exist, whereas the other trust could be created independently.
To Probate or Not to Probate
Probate is the legal process one’s estate goes through after one passes away. During this procedure, the court will begin distributing the estate to the proper heirs entitled to receive a portion. All wills must go through probate, and having a will makes probate much easier because the deceased’s wishes are clearly defined. The court will authenticate the will and approve the executor who will distribute property and belongings. Trusts, on the other hand, are not required to go through probate. There are instances where a trust may be subject to probate, but probate can be avoided via a revocable living trust.
Invalidating a Will or Trust
There are a variety of things that could make a will or trust invalid. Wills are much more easily invalidated, and the state law to which the will is subject may have a lot of say in this. Common mistakes that may render a will invalid include having the wrong witnesses, not destroying previous wills, and failing to abide by state requirements. Please read more about common mistakes individuals make when crafting a will that may render the will invalid.
It is commonly understood that trusts are more likely to survive any invalidity challenges than wills. Under the Uniform Trust Code (UTC), a trust is invalid if it has an unlawful purpose or a purpose contrary to public policy, such as imposing limits on religious freedom or the freedom to marry.[1] In addition, some states may require that a trust cannot violate the rule against perpetuities. This complicated rule dictates that a trust cannot last longer than 21 years plus a person’s life in being when the trust is created. If one of these conditions is invalid, only that condition is invalid, not the entire trust.
So then, is a will or trust better, and which should I use?
There is no easy answer to this question, but one thing is for sure: whether you choose to have a will or a trust, you should seek professional advice from financial and legal professionals. An attorney who is proficient in estate planning can advise you in your choice of estate planning tools and can assist you in drafting these documents. For guidance, contactLaizure Metz Legal Services at Christopher@laizuremetzlegal.com or (347) 625-7854.
[1] https://www.justia.com/estate-planning/trusts/trust-contests/