Chart Your Course: A Legal Navigation Guide
The Differences between a Will and a Trust
This column presents general information regarding estate and disability planning and probate. It is not intended to create an attorney-client relationship or constitute legal advice to readers. Individuals with legal concerns should consult with an attorney for advice regarding their specific circumstances.
By Jessica L. Estes
Probably, the most oft-asked question I hear is: “Which is better, a will or a trust?” The answer is that neither is better. They each serve a purpose and although everyone should have a will, not everyone needs a trust. It really depends upon your unique situation and goals.
What is a will? A will is a legal document that provides instructions regarding how and to whom you want your assets distributed upon your death. Everyone over the age of 18 should have a will. If you die without a will, the state has a set of rules, “intestacy laws,” that will govern how and to whom your assets are distributed upon your death. Trust me, you do not want the state deciding who gets your stuff. Moreover, in order for a will to become effective, two things need to happen. First, you have to die, and second, the court must accept the will into probate.
What is probate? Probate simply means to establish the validity of the will. In Maryland, a will is presumed valid if it is signed by the testator in the presence of two witnesses, who in the presence of the testator and each other, also sign and attest the will.
Once a will is admitted to probate, the court will appoint a personal representative — most often, the person named by the decedent in his will, to administer the estate and make sure all debts are paid and the remaining assets are distributed in accordance with the will.
Of course, there are costs associated with probate, which is why many people want to avoid probate. For those individuals, a trust may be appropriate.
What is a trust? A trust is an entity, separate from the individual who created it, that holds title to the assets of the individual and/or others for their benefit. There are two different types of trusts: those that take effect while you are alive, “living trusts,” and those that take effect only upon your death, “testamentary trusts.” Testamentary trusts are part of a person’s last will and testament and generally indicate that a named beneficiary’s share shall be held in trust for their benefit and can be used for their health, education, maintenance or support until a certain age or terminating event. For purposes of this article, testamentary trusts are no different than a will.
A living trust, on the other hand, is created while you are alive and assets are retitled in the name of the trust at the time of its creation. Because the trust is a separate entity, it can continue in existence after your death. Thus, any assets in a living trust will bypass the probate process upon your death.
Moreover, a trust has three “actors.” The “grantor” is the person who creates the trust and retitles his or her assets in the name of the trust. The “trustee” is the person who manages and administers the trust in accordance with the trust provisions. Generally the trustee is responsible for the management and investment of the assets and for making distributions from the trust. The “beneficiaries” are those individuals entitled to the income and principal of the trust, as well as those entitled to a share of the trust when it terminates.
Depending on your objectives, whether it is simply to avoid probate, to protect your assets, to provide for a special needs child or to qualify for public benefits, there are a variety of trusts that can accomplish your goals. It is beyond the scope of this article to delve into the different types of living trusts, but it should suffice to know that all of them avoid the probate process.
What are the differences between a will and a trust? The main difference is that a will must go through the probate process, whereas a trust avoids the probate process. There are other key differences. A will becomes a public document upon your death when a probate estate is opened; a trust can remain private. A trust allows for the management of your assets in the event of your incompetency; a will does not. Finally, a trust can provide for distribution of your assets during your lifetime, at death, and after your death. However, a will can only direct the distribution of your assets after your death.
If you are considering a trust, consult a qualified estate planning attorney to determine which trust may be right for you.
Jessica L. Estes is an elder law and estate planning attorney at Byrd & Byrd, LLC with offices in Bowie and Prince Frederick. She can be reached at 301.464.7448 or on the website at byrdandbyrd.com
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