Wills and trusts. Trusts and wills.
Often used in the same sentence, placed under the same area of law, and carrying a similar sense of fancy legalese. New clients regularly call us asking for one or the other, and are confused when we differentiate them. Aren’t they the same?
By no means! While they can overlap, and often fulfill similar objectives, wills and trusts are distinct legal documents with different roles and areas of influence. And getting the right one can make thousands of dollars’ worth of difference.
So let’s dive into another edition of Myth-Busting Matters: what are wills? What are trusts? And where does this confusion lie?
Wills are legal guides for executing your probate (the legal process of post-death activities). They establish who gets what, how they get it, and who will make sure all this happens.
If a person passes away and has probate assets, then, in most cases, the will should be presented to the court for probate. Wills don’t avoid probate, but instead ease the probate process. This limited scope makes a will simpler in process, but lessens its flexibility.
Trusts are legal entities that 1) hold property, 2) with specific instructions, 3) to be carried out by specific people.
If a will is a map with directions from A to B, a trust is a car with a built-in GPS. It is typically more expensive, and requires more maintenance, but is much more flexible, and can take you and your things many places.
You can use trusts to mitigate taxes (often paying for themselves with this feature alone), manage your assets while living, distribute them according to your desire after you pass, and so much more.
Properly implemented, trusts can even help you avoid probate. While Washington State has a fairly streamlined probate process (unlike, say, California) avoiding probate can still be a worthwhile and cost effective goal, especially if you have property in several states.
Wills and trusts may be different, but they often work together, and this is cause for some of the confusion. Here are a couple of examples of wills and trusts helping each other.
“Testamentary trusts” can be found in many wills. These are trusts created by a will only after you have passed away, and they provide more options for distribution. You can create Minor Trusts to manage assets for beneficiaries until they turn 18 or older, Spendthrift Trusts for beneficiaries you don’t trust with a lump sum inheritance, Spousal Trusts to mitigate estate taxes, Special Needs Trusts to make sure beneficiaries on disability don’t lose their needs-based public benefits, and Conduit Trusts for maximizing payout from investment accounts, to name just a few.
So, wills and trusts: similar goals, often synergistic methods, but distinct legal documents for use in different situations. But which one fits your needs best? Schedule a consultation with us today, and find out!