4 Major Differences Between a Will and a Trust You Need to Know

During estate planning, the most common forms of documents are wills and trusts. Although both are beneficial tools, there are 4 major differences between a will and a trust that, depending on your situation, may make one a more attractive option for your family than the other.

Before addressing the differences between a will and a trust, here’s a general overview of each type of document and what it does:

What is a will?

A will is a document created by a testator (male) or testatrix (female) that details his or her wishes regarding the distribution of assets upon the death of the testator/testatrix. The terms of the will do not take effect until after the death of the creator  Most people creating a will choose to designate an executor (male) or executrix (female) who is responsible for carrying out the wishes expressed in the will including distributing assets, paying taxes, and fulfilling any special provisions.

Wills are relatively easy to create and inexpensive. To make a valid will in Illinois, the document must be written and signed by someone over the age of 18 who is of sound mind and body, as well as signed by two witnesses who do not receive anything from the will. All wills are subject to probate court.

What is a trust?

There are many different types of trusts, each with their own advantages and disadvantages. Generally, a trust is an estate planning tool that takes effect when it is created, rather than at the time of death of the creator. Moreover, assets that are to be distributed from the trust must first be transferred.

Unlike wills, trusts are typically not subject to probate court, and they are actually not that complicated or expensive to create for most people.

Surprised? For example, in Illinois, if you own any real property (i.e. your home), and/or have assets that total to an excess of $100,000, a trust won’t sink your budget. In the long run, it will save your family and estate a significant amount of money so it could really benefit you to start thinking about one now.

With most trusts, the trustee is the Grantor (i.e. the person making the trust). Most people typically do not select a third party to act as a trustee during their lifetime, but rather, most people designate third parties (like a spouse, family member, or a close friend) to act as a successor trustee when they pass.

The most common kind of trust is a Revocable Living Trust (RLT or LRT). While an LRT becomes effective immediately upon creation, it has little to no effect or ability to complicate the day-to-day assets during a grantor’s lifetime. In fact, in Illinois, the Federal Employer Identification Number (FEIN) is the same as the grantor’s Social Security Number if the trust needs to file taxes. Basically, for all intents and purposes, the LRT and the Grantor are the same entity until the Grantor passes away or becomes disabled.

4 major differences between a will and a trust:

 

  • Children: a will allows you to name a guardian for your children in the event of your death; a trust does not.
  • When it goes into effect: when a will is established, it is essentially dormant until the death of the person who created it. A trust, on the other hand, goes into effect at the time it is created.
  • Assets covered: a will covers property that is in your name when you die. In order for property to be included in a trust, however, the assets have to be transferred to the trust. For most people, this transfer of assets is easy and uncomplicated.
  • Probate: the biggest difference between a will and a trust is how each is handled during the distribution of assets; namely, whether or not the document will go through probate court. Typically, when someone dies with a will in place (testate), the will must go through probate court before any of the assets of the will are distributed. However, when someone dies with a will (testate), and you have an LRT and a “Pour Over Will” that are done properly, it will not be probated but rather filed as a small estate.

 

Pour Over Wills generally state the guardians for minor children, and they also state that all property not in the trust at the time of death should be given to the trust (if it is worth less than 100,000 and not real estate). If this is done, the Pour Over Will is simply filed with the county and probate is avoided altogether. The process of a will going through probate court can be expensive and time-consuming, and the contents of the will are made public record. A trust however, does not need to go through probate court. Avoiding probate court saves time and money and also protects the privacy of the beneficiaries and testator.

Estate planning solutions for Illinois residents

Estate planning is one of the most important things you can do to protect your family. At Lake Cook Legal Solutions, LLC, we provide Illinois residents with effective estate planning solutions. To start planning for your family’s future, please visit our website at www.lakecooklaw.com or contact our office at (847) 387-5559.

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Written by Lake Cook Legal Solutions, LLC

Lake Cook Legal Solutions, LLC

Lake Cook Legal Solutions has been helping people throughout Lake, Cook, McHenry, and DuPage counties since 2012. We focus our practice on matters involving Illinois families—namely Family Law and Estate Planning.