Will or Trust — What’s the Difference?

A revocable trust and a will are both legal instruments used for estate planning, but they serve different purposes and have distinct characteristics. Here’s a comparison between a revocable trust and a will:

Purpose and Functionality:

• Revocable Trust:
• Purpose: A revocable trust is primarily designed to manage and distribute assets during the lifetime of the grantor (the person creating the trust) and after their death.
• Functionality: The trust holds and manages assets, and the grantor can modify or revoke the trust at any time during their lifetime.
• Will:
• Purpose: A will outline the distribution of assets and instructions for the probate court after the death of the testator (the person making the will).
• Functionality: The will comes into effect only after the death of the testator, and it undergoes probate, a legal process to validate the will and administer the estate.

Probate Avoidance:

• Revocable Trust:
• Assets placed in a revocable trust typically avoid probate, leading to a faster and more private distribution of assets.
• Will:
• Assets in a will go through probate, a court-supervised process that can be time-consuming and public.

Flexibility and Control:

• Revocable Trust:
• Offers more flexibility during the grantor’s lifetime, allowing them to make changes or revoke the trust as circumstances change.
• It also allows the control and distribution of assets after death.

1. Example: You could have three different kids with three different distribution rules.
2. One could receive a lump sum.
3. One could only receive income from the trust and a lump sum at a later date.
4. Perhaps, the third has problems, like gambling, substance abuse, etc. You could make their income or lump sum distributions up to the trustee or even require drug testing and bank records as a stipulation of trust distributions.

• Will:
• Provides a set plan for asset distribution after the testator’s death, and changes may require formal amendments or the creation of a new will. This is also ‘contestable’ in court by others who may feel they were left out of the will and should have been included.

Privacy:

• Revocable Trust:
• Generally, provides more privacy since the trust administration occurs outside of the probate court.
• Will:
• Probate proceedings are a matter of public record, potentially exposing the deceased’s financial affairs online etc.

Costs:

• Revocable Trust:
• Establishing a trust may involve upfront costs but can lead to potential savings by avoiding probate expenses.
• Will:
• Probate proceedings involve court fees and attorney costs, potentially making it more expensive than a trust.

Assets Covered:

• Revocable Trust:
• Typically covers assets that are transferred into the trust.
• The trust usually includes a will with a “Pour over Provision” that directs items missed in the trust to ‘Pour over’ to the trust removing the need for probate.
• Will:
• Governs the distribution of assets solely owned by the testator at the time of their death.

It’s important to note that the choice between a revocable trust and a will depends on individual circumstances, preferences, and goals. Many individuals use both instruments in their estate planning strategy. Additionally, the laws and regulations regarding trusts and wills may vary by jurisdiction. Consulting with legal professionals is advisable to ensure proper planning based on specific needs.

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