Among the most common questions we get is to explain the differences between Wills and Trusts. The best way to start answering that question is to first define what we mean by Wills and Trusts.
What is a Will?
Often called a Last Will and Testament, a Will expresses your final wishes for the disposition of your property after your death.Here are some little-known but very important facts about wills:
- Wills are not effective the day they are signed. In fact, wills do nothing to help during their maker’s lifetime.
- Wills cannot be enforced until:
- The maker of the will has died,
- A person interested in the deceased’s estate files the will with the proper court,
- And the court conducts a hearing to hear evidence about whether the will should be considered the Last Will and Testament of the deceased.
- So from the day they are signed until the day a judge declares them valid (usually 3-6 months after the death of the maker (a/k/a the “testator”), a will provides no help to the maker or her family.
- Wills chain the maker’s family to the government’s system for holding and ultimately giving their property to loved ones. That system is called “probate”. For those who have no legal documents, or only have a will:
- Disability prior to death may require a probate lawsuit called “guardianship”, in which a family member sues their disabled loved one in probate court, asking a judge to declare their loved one “incapacitated” and appoint the family member as the guardian of the loved one and her estate.
- Those who have been declared by a court to be incapacitated lose a number of important civil and property rights. They cannot enter into contracts or vote. They lose all control over the management and the use of their property. Their property rights now belong to a judge, who is most often a stranger to the disabled family member.
- A guardian’s authority is strictly dependent on the approval of a judge and is very limited. Guardianships are greatly more expensive than the cost of probating a will after death, because (a) the Guardian has to continually ask permission of the Judge to take certain actions for their disabled family member and each interaction with the court costs money – lots of it – in attorney’s fees and court filing fees; and (b) because guardianships go on as long as the disability continues.
- The average cost to probate a will in Texas in 2015 was $10,000 to $15,000. In our experience, the average cost of a guardianship is $25,000 to $75,000, depending upon how long the disabled person needs a guardian.
What is a Trust?
A Trust, on the other hand, provides a more secure way to hold, manage, and distribute property during your lifetime. For most families, a trust is a smarter way to enhance their control over their property during life, and a much more effective and efficient way to take the place of a will after death.
In simple terms, a Trust is a legal relationship between three parties. The three parties to a Trust are the:
- Grantor – the maker or creator of the trust relationship;
- Trustee – who holds title to property and agrees to follow the grantor’s instructions; and
- Beneficiary – the person for whom the Trust was created in the first place.
Our clients almost always begin as all three parties to this trust relationship. They are the grantors. They make the rules. They are the initial trustees. They keep control over the property in their trust as the Trustee. And as long as they live they are the primary beneficiaries of their trust. As significant life events happen, their roles as trustees can transition to other persons our clients trust to carry out their instructions and care for them if our clients can’t. And, finally, there will be other beneficiaries of the trust when our clients are no longer here to serve their family. The Trust functions like a Will distributing our clients’ property to children, grandchildren, or other loved ones.
What’s the Difference?
So now that we know what each of these tools is, how are they different? Here are a few, but not nearly all, of the ways Will and Trusts differ.
- Effective Date. We find that most people are surprised to learn that a Will is not effective when it is signed, but takes effect only after the maker’s death and after a probate court has examined and approved the Will. A Trust, on the other hand, is effective the moment it is signed and can accept and hold property from day one. That property is then managed according to the instructions you put into your Trust document.
- Privacy. Because a Will must be subjected to the legal process called probate, the administration of a Will is always very public. The whole world can find out who inherited what property from you. Administration of a Trust happens privately. The Trust survives you, so there is no probate required and your property passes to your loved ones privately, without the mandatory disclosures that are part of the probate process.
- Governing Rules. With a Will, your property is still subject to the government’s rules that require approval of the Will, involve a judge who appoints your executor, and the completion of the multitude of other requirements in the probate legal process. A trust operates under Your Rules. The person you appoint to oversee administration of the Trust is in charge not because a judge approved, but because you selected them.
- Protection from Disability. Without question the biggest difference between Wills & Trusts is how you and your property are protected in the event of a disability. Since a Will is not effective until your death, if you become disabled you will be relying on a power of attorney for finances to manage your property. For a number of reasons, many third parties (especially banks and other financial institutions) are reluctant to honor powers of attorney. If they don’t, the only alternative is to apply for a guardian of your estate to be appointed – a cumbersome and enormously expensive process.
Alternatively, since a Trust owns the property it manages, your disability doesn’t cause a loss of continuity in the management of your property. Your Trust is not affected by your disability. Since you don’t hold title to the property in your name, there is no estate that requires a guardian to manage.
These are only a few of the many practical differences between Will and Trust planning. At Breshears Law, our proven estate-planning process is designed to fully educate and inform you on those differences, so that you can make the decision on which technique is best for your family.
If you have questions about whether a Will or a Trust works best for your family, we invite you to call us. We can help answer those questions for you, just as we have for clients and their families for more than 30 years. We are conveniently located in Southwest Fort Worth, at the intersection of the Chisholm Trail Parkway and Edwards Ranch Road, in the Shops at ClearFork.
We hope that this post has served its educational purpose, but it is not legal advice nor a substitute for proper legal advice. So we encourage you to contact an estate planning attorney today to learn how to design a plan you deserve, from counsel you trust. That’s our mission and our desire for you and the ones you love. So thanks for reading!
Check back here from time to time, for more answers to the questions you may be asking about protecting your family’s future. Until then, we pray God blesses you and the ones you love.