Trusts and wills are both documents that provide instructions for handing over assets to other people, which may be the reason why so many people get these two types of documents confused. Knowing the difference between these two documents can help you decide which type of document is right for you.
How is a trust different from a will?
While there is some overlap, trusts and wills generally satisfy different needs and accomplish different goals. A will is a document that is used to disperse your assets in the event of your death. A will names beneficiaries for your property and guardians for your children if you have any. A will also provides instructions for the handling of financial affairs like how your debts and taxes will be paid. Wills only go into effect once the creator of the will dies.
A trust is a document that establishes a relationship between a legal entity (known as a trust) and a beneficiary. The trust is designed to protect assets and distribute them to the beneficiary. When the trust is formed, very strict instructions are created regarding how the assets can be managed. The trust is managed by a trustee. Unlike a will, a trust is placed in effect as soon as it is created.
Another key difference between wills and trusts is that a will must go through probate—meaning that the court oversees its administration. This takes time and money. A trust, on the other hand, does not go through probate and is not handled by the court.
Do you need a lawyer to make a will or a trust?
A will is a relatively simple document, and there are many examples of generic wills online. Some people establish their will through a lawyer while others choose to make one on their own.
A trust is a much more complicated document, and many people work with an attorney to get this document set up and ensure that it's done properly.
However, if you don't know what type of document will best suit your needs, you should consult with an estate planning lawyer. He or she will be able to assess your needs based on your assets, the laws specific to your state, and your current circumstances. For more information about this issue, and whether or not a will or a trust will be right for you, consult with an estate planning lawyer today.