Many people who look into estate planning ask, “What is the difference between wills and trusts?” While both wills and trusts deal with estate planning, they serve different purposes. In this post, the legal team of PJI Law, PLC, estate planning lawyers from Fairfax, VA, outline the key principles of wills, trusts, and their role in asset protection.
Wills and Trusts in a Nutshell
Here are the basic features of wills and trusts:
A Will
- Only comes into effect once the will maker is deceased
- States who will receive the decedent’s assets
- Appoints an executor to carry out the decedent’s wishes
- Is potentially contestable and must go through probate, a legal examination by the court
A Trust
- Can take effect immediately after its creation
- Allows a person or an institution (a “trustee”) to hold assets for beneficiaries
- Can distribute property before or after the trustor’s passing
- Can be irrevocable or revocable/changeable
- Assets in trust generally avoid probate
While we recommend that everyone have at least a will (whether or not you also have a trust), trusts aren’t strictly necessary for all individuals. Trusts are particularly helpful for individuals who have assets that are potentially going through probate, own property across several states, or have minor children.
Wills: the Basics of Estate Planning
A will, also known as a last will and testament, is a legal document specifying how the will maker wishes to handle asset distribution and other affairs after their death. A will typically includes all of the principal’s assets, such as real estate, vehicles, and other property, and usually a list of debts. A will may also provide directions for a funeral or memorial service.
Usually, every will must go through a probate court before execution. In some states, it may be possible to avoid probate under specific conditions. Certain assets, such as insurance policies and retirement accounts, may, if planned properly, pass directly to named beneficiaries without probate. (more…)
