“What is the difference between a will and a trust, and why would I want a trust and not a will?” A will is a document that says, “Upon my death, here’s what happens to my assets.” It does nothing while you’re alive. So, if you’re alive and you become disabled, the will doesn’t help because it’s not yet effective, and so you need to go to a guardianship or conservatorship type of proceedings, and it’s expensive and not desirable.
A trust, on the other hand, would be effective immediately, so as soon as you sign a trust, you transfer legal title to your assets into your trust, and, thereafter, the provisions of your trust controls your assets. You can be the trustee of your trust, so you have total control over your assets, you still own all of your assets, and, while you’re alive, your assets are not going to be subject to a conservatorship or guardianship type of proceeding. Upon your death, a trust can say where your assets go, to who, under what terms. A will can do that, also. But, with a will, upon your death you go to probate. This means you go to court. You file a bunch of pleadings with the court. You give notice to everyone. You have to allow people that might have a claim to come bring their lawsuits against the probate estate. There are costs, and it’s a public proceeding, so the whole world knows what your assets are.
But, with a trust, the administration is private. You put the terms of your trust in your trust, and those are the terms and those are the instructions that your trustee will follow. It’s done privately, there are no court proceedings, there are no public disclosures, and then your trust can continue to live well after your death in a manner that can protect your assets in the hands of your children. So the trust can say, “Hey, hold the assets for my child, pay for my child to go to college, pay for additional things for my child, let my child have money at certain times during their life.” But, if your child were sued, divorced, files bankruptcy, gets levied by the IRS, none of the creditors can come to the trust and take your child’s assets. So this is the difference between a will and a trust, and, of course, a trust is much superior in the end result to your family.
Whitney Sorrell is a lawyer, CPA, and former IRS Revenue Agent and senior partner of Sorrell Law Firm, PLC, in Scottsdale, AZ. Mr. Sorrell’s law practice focuses on business organizations and federal tax planning, IRS dispute resolution, asset protection planning for small business owners, and estate planning for nigh net worth individuals.