Most people have heard the terms “will” and “trust,” but not everyone knows the differences between the two. Both are useful estate planning devices that serve different purposes, and both can work together to create a complete estate plan.

One main difference between a will and a trust is that a will goes into effect only after you die, while a trust takes effect as soon as you create it. A will is a document that directs who will receive your property at your death and it appoints a legal representative to carry out your wishes. By contrast, a trust can be used to begin distributing property before death, at death or afterwards. A trust is a legal arrangement through which one person (or an institution, such as a bank or law firm), called a “trustee,” holds legal title to property for another person, called a “beneficiary.” A trust usually has two types of beneficiaries one set that receives income from the trust during their lives and another set that receives whatever is left over after the first set of beneficiaries dies.

A will covers any property that is only in your name when you die. It does not cover property held in joint tenancy or in a trust. A trust, on the other hand, covers only property that has been transferred to the trust. In order for property to be included in a trust, it must be put in the name of the trust.

Another difference between a will and a trust is that a will passes through probate. That means a court oversees the administration of the will and ensures the will is valid and the property gets distributed the way the deceased wanted. A trust passes outside of probate, so a court does not need to oversee the process, which can save time and money. Unlike a will, which becomes part of the public record, a trust can remain private.

Wills and trusts each have their advantages and disadvantages. For example, a will allows you to name a guardian for children and to specify funeral arrangements, while a trust does not. On the other hand, a trust can be used to plan for disability or to provide savings on taxes. Sheri Abrams, Attorney at Law, can tell you how best to use a will and a trust in your estate plan.

We all know we are supposed to do estate planning, but not all of us get around to it.   So what happens if you don’t have a will when you die.  Your estate will be distributed according to state laws, which may or may not be the way you want it to be distributed.

Dying without a will is called dying “intestate.” Each state has laws that determine what will happen to your estate if you don’t have a will.  If you are married, most states award one-third to one-half of your estate to your spouse, with the rest divided among your children or, if you don’t have children, to other living relatives such as your parents or siblings.  If you are single, most states provide that your estate will go to your children or to other living relatives if you don’t have children. If you have absolutely no living relatives, then your estate will go to the state.

Note that any jointly held assets, such as bank accounts or houses, will go directly to the co-owner. In addition any life insurance policies or retirement accounts will go directly to the beneficiary designated on the account. And if you have a trust, any assets in the trust will go to the beneficiary designated in the trust.

One purpose of a will is to name a guardian for your young children; if you do not have a will, the court will determine who will act as guardian. The court will also appoint the person who will administer your estate. In addition, if you are unmarried, but have a partner, your partner will not inherit anything from your estate without a will naming him or her as a beneficiary.

The best way to ensure your estate is distributed the way you want it, is to plan your estate with an experienced Attorney such as Sheri Abrams.