Definition of a Will
A will is a legal document that allows a person to leave directions on how their assets are to be distributed after they die, who they prefer to oversee this process, and who will be the legal guardian of their children.
Definition of a Trust
A trust is an agreement by which the owner of property gives the legal ownership of the property to one person (called a trustee), so that the trustee can manage or distribute the property for the benefit of another person (known as the beneficiary). Beneficiaries are normally people who, for a variety of reasons, cannot or should not own and manage the asset themselves: minors, those with disabilities or illnesses, or those with a lot of debt.
The trust document serves as a rulebook that the trustee must follow. Common uses of trusts in elder and special needs law include planning for one’s own incapacity, caring for minors if both parents die, and caring for adults with disabilities. Other trusts can be used for tax planning, business planning, and charitable giving.
What Makes a Trust Different from a Will?
A will always operates after death, but trusts can be effective during life as well as after death.
A will may contain a trust–for example, a young couple’s will may contain a trust that will only be established if they both die before their children reach age 18; or an older couple’s will may contain a trust that will allow the husband to stay eligible for Medicaid nursing home benefits if the wife dies first.
If assets with a single owner are distributed through a will, the probate process is necessary in order to transfer ownership of the assets to those named in the will. However, if all assets are transferred to a trust, the probate process is avoided because the trustee already legally “owns” the assets–and can therefore pay creditors and distribute assets after death.