Differences Between Wills and Trusts
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What Is a Will?
A will is communication that sets forth the wishes of person, who is called the "testator," in the event of their death. There are typically requirements that must be met in order for a will to be valid. Although the exact specifications will vary by state, generally, a will must be:
- In writing
- Name specific property and material provisions
- Be signed
What Are the Requirements of a Testator?
A testator is the person who is the maker of the will. The testator has several requirements that they must meet in order to be qualified to make a valid will. A testator must:
- Be of age (18 years old)
- Have requisite mental capacity
- Not be subject to undue influence or subject to fraud
Typically an executor must be named. In the event one is omitted or there is ambiguity, it is not uncommon for a court to appoint an executor.
Many states recognize wills that do not meet the requirements listed above, provided the document still meets some standard. These wills are considered "holographic wills."
What is a Holographic Will?
A holographic will is a will that was made in the handwriting of a testator and was not formally executed or type written on a legally executed form. A holographic will has less requirements than a Formal Attested Will, but the main requirements are that the terms must be written in the testator's own handwriting.
A holographic will is valid if:
- Evidence exists the testator created the will
- The testator had adequate capacity
- The document is signed
What Is a Trust?
By way of some contrast, a trust is a legal instrument where one individual holds property for the benefit of another person. Trusts use specific, often confusing terms to describe parties, listed below:
- Grantor: Individual who created the trust
- Trustee: Person overseeing and managing the property
- Beneficiary: Person who is receiving the property
What Is the Difference Between Wills and Trusts?
One of the main differences between a Will and Trust is that a Will goes into effect after the testator dies, while a trust can be made during someones lifetime. A will also covers only property that you own when you die, while a trust can cover property that is jointly held with another person. Other differences between a Will and Trust can be:
1) Inter Vivos: Perhaps the starkest contrast between wills and trusts is a trust may take effect in distributing assets before an individual’s death. It is worth mentioning that not every trust functions this way. However, it is an option that makes a trust quite distinct from a will. Moreover, while this type of trust may not always be the case, it nicely illustrates the next difference between the two instruments.
2) Probate: As alluded to above, trusts do not need to go through probate. Probate is a process by which the property described in a will is distributed. It can be long and, depending on how friendly or litigious the family is, expensive.
3) Cost: Wills may ostensibly be created for free (although it is highly ill-advised to do so), whereas trusts are extremely complicated to create and must be maintained, making the expense involved considerably higher.
4) Privacy: Trusts may never see the light of day, whereas wills need to go through probate, thus exposing the assets and property to the light of day. While this may not be a big deal, it is certainly a consideration for larger estates or if someone is concerned over having the world know how they chose to distribute their assets.
As importantly, property in a trust may be exempt from the reach of creditors.
Should I Hire a Lawyer?
Planning and managing an estate is a complicated endeavor. If you have any questions over the best way to plan for your family’s future, your first step should be to contact an estate planning lawyer. Hiring a lawyer is the best way to ensure your assets are handled properly.
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Last Modified: 10-03-2016 02:59 PM PDT
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