Many people wonder about the difference between a will and a trust. They serve similar purposes, but have some very distinct differences.
What is a Will? #
“Will: An instrument, executed with the formalities of state statutes, by which a person makes a disposition of his real and personal property, to take effect after his death, and which by its own nature is ambulatory and revocable during his lifetime.” Black’s Law Dictionary
“Will: A document that says who gets your stuff when you die.” Gary’s Simple Definition
A will is a written document that takes effect after your death and that disposes of your real and personal property. It also usually nominates a personal representative (a/k/a executor), can state wishes for funeral and burial, and can nominate a guardian for minor children. The formalities for creating a will are established by statute. A will can be changed or revoked at any time prior to death. To have any legal effect, the will must be submitted to the court through a process known as probate, and it must be approved by a judge.
What is a Trust? #
We often speak about a trust as if it were a legal entity, like a corporation. Although it is sometimes treated as an entity, such as for tax purposes, as the Idaho Supreme Court has stated, “a trust is not a separate legal entity; rather, a trust is no being at all.” Indian Springs v. Indian Springs Land Inv., 147 Idaho 737, 215 P.3d 457, 465 (2009).
If a trust is not an entity, then what is it? Simply put, a trust is a legal relationship governed by a written document and state law. In this relationship there is a “grantor” or “settlor”, a “trustee”, and one or more “beneficiaries.” The grantor is the person who creates the trust, establishes its terms, and transfers property to the trustee. The trustee holds legal title to the property and must manage or distribute it according to the terms set by the grantor, all for the benefit of the beneficiaries. A beneficiary is someone who, as the name implies, is supposed to receive some benefit from the trust.
The most common type of trust is a revocable living trust. In this type of trust the grantor benefits during their lifetime, and the grantor can change or revoke the trust anytime they want. When the grantor dies, the trust becomes “irrevocable” and the assets are then administered or distributed to the other beneficiaries named in the trust document (usually the grantor’s heirs).
Similarities #
- Both must be in writing.
- Both can be used to dispose of your property after you die.
- Both require the person creating them to have “capacity” – a minimum level of mental ability to understand what they are doing.
- Both are governed by state law.
- Both establish a representative with responsibility for the estate.
Differences #
Filing with Court #
- Will: A will must be submitted to the court through the probate process to have any effect. It becomes public record.
- Trust: A trust does not have to be submitted to the court to be effective. It does not usually become public record. Although Idaho does have a statute that requires “registration” of a trust, in practice this rarely happens unless the trust is contested. This is because there are generally no real consequences for not registering the trust. Failure to register does not affect the trust’s validity.
Authority of Representative #
- Will: Although nominated in a will, the personal representative must be appointed by a judge before the personal representative has any authority.
- Trust: A trustee’s authority is effective as soon as they accept appointment as trustee.
Timing #
- Will: A will takes effect only after your death and approval by the court.
- Trust: A trust takes effect during your lifetime and continues after death.
- Will: There is a delay between the time of death and the time when the provisions of a will may be implemented. This is because the will must be probated. This often results in heirs being unable to access assets to pay the decedent’s bills, funeral expenses, etc. for weeks to months after the decedent passes.
- Trust: The terms of a trust may be implemented immediately upon death, allowing quick access to assets for necessary expenses.
Funding #
- Trust: A trust is only effective if it is “funded,” meaning that assets must be transferred to the trustee. An unfunded trust is pretty much worthless. Assets not transferred to the trust prior to death must still go through probate.
- Will: A will does not need to be funded – it disposes of your estate without any transfer to a trustee or personal representative.
