You’ve probably heard of a will, and most people have also heard of a trust. However, for many, that’s about where our knowledge ends. Let’s review the difference between a will and a trust and help you discover what’s right for you.
The goal of creating either a will or trust is so you may decide who inherits your money, property, and other assets. In Washington state, someone who passes away without a will is considered to have “died intestate.” When this occurs, their assets enter a process known as intestate succession.
In intestate succession, the state decides who receives assets that are not co-owned or do not have any named beneficiaries. Typically, the first people to receive these assets are someone’s closest living relatives depending on whether you are married or single and have children, living parents, or siblings. Every situation is unique and based on surviving family and types of assets.
Many assume that those closest to them will automatically inherit assets or just divide them among themselves. However, relying on a combination of state law and family cooperation to provide for the people you care about most is risky at best. For example, someone without close relatives who would like their assets to pass to their domestic partner but dies without a will may have their assets pass to a distant cousin they never met.
Intestate succession does not consider a deceased person’s preferences because it cannot. Without at least a will, there is no way to know someone’s specific wishes regarding the allocation of their assets.
The only way to avoid intestate succession is with a will or trust.
Will vs Trust
Legally referred to as a Last Will and Testament, a will is a written legal document that allows property and assets to pass to the people you want to provide for after your passing. To execute a valid will in Washington state, a person must be at least 18 years old and have the mental capacity necessary to execute legal documents.
Most adults should have a will. Without one, a deceased person’s assets may not go to the people who should have and deserve them.
What can a will do?
A will fulfills many essential roles regarding allocating a person’s estate. A will can:
- Appoint a successor guardian to care for minor children. A trust cannot make arrangements for the physical care of minor children.
- Transfer property. However, when a person only has a will, the property must pass through a legal process known s probate (see below).
- Hold a specific type of trust, known as a testamentary trust. This type of trust only comes into existence once you pass away. A testamentary trust is created by the terms of a will and is a good option for people with minor children who do not want or need a living trust. However, a testamentary trust includes only a few of the benefits of a revocable living trust (see below).
It is essential to note that even with a will, your assets must pass through probate. Probate is the legal process of transferring titles and assets out of the name of someone who passed away and into the name of their beneficiaries.
Probate is a public process, which means the second your assets hit probate, they become a matter of public record. If you’ve ever wondered how a celebrity’s assets become general knowledge after they die, it’s because their will hit probate. While the paparazzi may not scour court documents for your personal information, it’s still readily available for nosey relatives and other snoopy acquaintances.
During probate, the court appoints an estate administrator with authority to manage the estate until it is transferred to the recipients, usually a family member. However, many families also need an attorney to probate an estate. The attorney and other probate fees are often much more expensive than creating a trust to avoid probate.
In Washington state, assets typically take a year to pass through probate. In addition, the personal representative must obtain “letters testamentary” from the court, which sometimes takes weeks. Until receiving the letters testamentary, the personal representative has no authority to transfer money or pay bills. So, probate often delays funds getting to beneficiaries, including minor children.
Trust vs Will
While our primary focus is on the difference between will and trust, there are some areas of overlap between the two documents. Both wills and trusts can:
Set instructions for distributing property and other assets after death.
Nominate a “helper” or executor (for trusts, this person is known as the “trustee”) who ensures that property and assets are distributed according to your wishes.
Name an individual to look after any property bequeathed to minors until the minors become adults.
What is the difference between a will and a trust?
Two types of trust often play a role in a comprehensive estate plan: revocable living trusts and testamentary trusts.
A revocable living trust is a way to transfer property that avoids the probate process. After creating and funding a revocable living trust, the grantor (the person who began the trust) is no longer the legal owner of those possessions. The trust becomes the legal owner. However, the grantor still has the rights to those possessions and may transfer vehicles, bank accounts, investments, real estate, and other property to and from the trust (except those transactions occur in the name of the trust). A revocable living trust avoids the probate process, saving heirs time and money. Once the grantor passes away, the trustee makes distributions to beneficiaries according to the terms of the trust.
A testamentary trust is used by those who don’t want to create a revocable living trust but still desire some control over how beneficiaries use their assets. For example, a testamentary trust may be used if a beneficiary is young, has issues like a gambling or addiction problem, or needs to pay for education or medical care. The trust can also protect assets from a beneficiary’s creditors and prevent assets from leaving the family due to a beneficiary’s divorce or death. A testamentary trust may bequeath money monthly, annually, or upon certain landmarks like college graduation or a specific birthday. One significant drawback to a testamentary trust is that it does not avoid the probate process.
What can a revocable living trust do (that a will cannot)?
A revocable living trust can:
- Avoid probate. Probate can be an extremely cumbersome procedure. Even a seemingly straightforward case, such as a deceased parent leaving a house to their child, can drag on and typically needs an attorney to help resolve it. The process becomes more complex if family infighting occurs, such as when a family member believes they did not get a fair share or there is a dispute over a sentimental item. Due to the lack of privacy during the probate process, family squabbles may become widely known and can drag out the probate process for years. Also, the administration of an estate in probate can be costly compared to a revocable living trust.
- Help beneficiaries receive and benefit from the assets much sooner than they would through the probate process.
- Keep assets private. A will becomes public record once it gets administered in probate. However, a revocable living trust does not need to be filed in court. So, the information in the document remains private. The trustee (the person who administers the trust once the grantor passes away or becomes incapacitated) simply follows the trust’s instructions, and your privacy is protected.
- Provide flexibility. Revocable living trusts are very flexible documents that provide all sorts of planning opportunities. Planning options (such as sub-trusts, special needs trusts, asset protection trusts, etc.) can be tailored to your needs.
- Plan for incapacity. A revocable living trust can provide a more seamless experience for family members than a will. If the trust is properly “funded” (and your assets are in the trust), a successor trustee can immediately step in, help with finances and home upkeep, and ensure loved ones are cared for promptly.
Can you have both a will and a living trust?
Yes. At Harbor Law Firm, we never create a revocable living trust without also creating a specific type of will, known as a pour-over will.
Unfortunately, it’s common for some assets to get left out of a revocable living trust, especially when a trust is maintained for many years during a grantor’s lifetime. For example, an individual might open a new investment account and not properly title the account or not have a listed beneficiary.
With a pour-over will, any assets held in the deceased’s name but not included in their revocable living trust are automatically transferred to the trust after they pass away. Although these assets will need to be probated, the combination of the pour-over will and the revocable living trust ensure that the assets go to the intended beneficiaries.
Do you need a will or trust?
While the difference between trust and will is significant, not everyone needs the benefits provided by a trust. However, almost everyone needs a will. The three main factors when deciding between a will or trust are age, income, and assets.
For example, the needs of a couple in their early-30s who rent a home and have one child ARE likely fine with only a will. Meanwhile, a couple in their mid-60s with several children and seven figures in savings will benefit significantly from the advantages of a revocable living trust. However, a couple in their early-30s with a seven-figure income, and the assets that tend to accompany that income level, should form a trust.
In general, a will is significantly better than nothing because it will distribute your assets to your intended beneficiaries, but it is always preferable to avoid probate by using other planning tools such as a trust.
Creating a will is a straightforward process. Trusts have more upfront costs, and you need to transfer new assets into the trust throughout your life. However, Harbor Law Firm can assist you as you acquire new assets, and you have a safety backup with the pour-over will. Ultimately, the decision between a will or trust is a personal decision based on your specific needs.
What does your specific estate plan need?
Wills and trusts have a few similarities, but what the difference between a will and a trust there is!
The best way to decide whether you will benefit from wills trusts or both is through an evaluation with experienced estate planning counsel. Harbor Law Firm offers personalized legal attention for estate planning in Washington state and will help solve the revocable living trust vs will debate with you. Our firm makes your 2023 (and beyond) estate planning process as simple and stress-free as possible. Our services include the following:
- Knowledgeable guidance customized to your specific circumstances and goals.
- A fully remote process that never requires you to leave home.
- Hours to fit your schedule.
- An adaptable process for exchanging documents and collaborating.
- Flat-rate pricing, so you’ll never be surprised by a legal bill.
We also offer complimentary consultations and can speak with you outside regular business hours. For more on our remote estate planning process, visit this page.
Our proven process defines exactly what you can expect, and our focus is always on your goals. Please contact us to set up a consultation with our team today.