What’s the Difference Between Wills and Trusts?

Understanding the differences between wills and trusts is necessary to make the very best decisions about your estate plan. At Breshears Law, we exist to empower people to use the law to make great decisions for themselves and those they love. Every estate planning case at our firm begins with an assessment of your unique circumstances; your needs, goals, priorities and values. The first conclusion we draw is whether we should recommend a plan based around a Will as the core document, or whether a plan based around a Trust is best for you. In almost every case we accept, we discuss with our clients the differences between Wills and Trusts, and how those differences impact our recommendations. So let’s examine both options together, beginning with Wills.

What is a Will?

Often called a Last Will and Testament, a Will is a legal document that expresses your final wishes for the distribution of your estate upon your death. A Will replaces the state’s decisions about who will inherit from you and when and how that will happen. 

What is a Trust?

A Trust is a legally-recognized relationship between that provides a way for the creator of the Trust to hold and manage his or her property, both now and in the future. Every trust creates three distinct roles and, in most cases, our clients begin by occupying all three roles. These roles are:

• Grantor. Creator of the Trust. The Grantor makes the rules that will govern how property transferred to the Trust will be held, administered (for the Grantor’s benefit) and distributed to the Grantor’s loved ones. 
• Trustee. A trustee agrees to hold legal title to property held in a trust and to follow the Grantor’s rules. The trustee does not hold and manages trust assets for the trustee’s individual interest. The trustee always holds title to and manages property for the benefit of someone else – the third party to this legal relationship. The beneficiary.
• Beneficiary. A beneficiary is a person for whom the trust was created in the first place.

Most often our clients occupy all three roles at the time their plan is created.  They are the Grantors, so they make the rules. They are also the Trustees, so they hold title to assets in their role as trustees, and agree to follow the rules. And they are the first persons to benefit from the trust, so they are the Beneficiaries of the trust.

By establishing these roles and moving property out of their individual names and into their names as the trustees of the trust, they are able to take full advantage of the power that trusts provide them and their family. The rules are put in a written document called a Trust Agreement. The Trust Agreement provides the answers to the three big questions that every plan must answer:

1. Control.  Who is in charge? (as trustee of the Trust)
2. Access.  Who can benefit from the use of Trust assets? (as beneficiaries)
3. Timing.  When and how does everything take place?

As life brings change to our Grantors, the identities of the persons occupying different roles can change. The Grantors will always be the rule makers, but if they are no longer able to serve as the trustee over trust assets, the person or persons they named in the rule book – the Trust Agreement – are automatically qualified to step in and take over management of trust assets. Even so, as long as the Grantors are living, their replacement as Trustee will be managing the property for their benefit, as they continue to be the Beneficiaries of the trust they created.

Finally, when the Grantors are no longer here to serve their families, the identities of the Beneficiaries will change to those loved ones or charities who the Grantors chose to name in their rule book. In that way, a Trust takes over the function of a Will by distributing assets among beneficiaries.

The differences between these two governing documents are more profound today than ever. We encourage you to examine the table below to discover the key differences between Wills and Trusts.