What’s the Difference Between a Will and Trust

In 15+ years of estate planning, there are common questions like “What is the difference between a will and trust?” or “do I need a will or a trust”? For many people when they think about estate planning, it starts with the Revocable Living Trust versus the Last Will and Testament debate.

This blog article will go in-depth discussing the pros and cons of living trusts versus a will to help you determine which is right for you. Which is better will vs. trust in Michigan?

What is a Last Will and Testament?

A will, or Last Will and Testament, is a legal document that gives instructions to the probate court. In Michigan, the Last Will and Testament appoints a Personal Representative, in other states, you may be more familiar with the term Executor.

What is important to understand is that the Last Will and Testament does not have any power until the person who created it has passed away. Then the Last Will and Testament will be submitted to the Probate Court, where now an estate will be opened.

The Probate Court will now be in charge and appoint a Personal Representative, typically whoever was named as Personal Representative in the Last Will and Testament.

Together, the Probate Court and Personal Representative will pay off any final expenses, pay off creditors, and then distribute assets.

The main thing to remember about a Last Will and Testament is that it does not avoid probate, instead it gives instructions to the probate court on how to administer an estate.

What is a Revocable Living Trust?

A Revocable Living Trust is an estate planning document that can avoid probate (unlike a Last Will and Testament) and can control the distribution upon death.

If in a will you can appoint a Personal Representative or Executor, in a Revocable Living Trust you appoint a Trustee. Typically, the person who creates the Revocable Living Trust will be the initial Trustee, then they will appoint Successor Trustees.

Think of a trust like a suitcase or piggy bank. You are in control while alive, you manage it, then upon death you pass that suitcase or piggy bank to the Successor Trustee who then pays of your final expenses and distributes the assets to whomever you had named in the trust.

Successor Trustees have to follow the language of the trust, they cannot just do whatever the want, they have to distribute to the beneficiaries you listed in the trust.

Will vs. Trust. Do You Need a Revocable Living Trust or Do You Need a Last Will and Testament?

It is probably a bit of a trick question, because chances are your family will want a trust based estate plan and with that trust based estate plan you will probably want a Pour-Over-Will, which is a form of Last Will and Testament.

A Pour-Over-Will is a will that says if anything ends up in probate, then the will will knock it into the trust so it will follow the distribution terms of the trust. So, even if you have a trust based estate plan, you will still want to have a will as part of that estate plan, along with a Financial Power of Attorney, Medical Power of Attorney and Personal Care Plan.

That said, a lot of people think that a trust is only for estate tax planning, when in reality if you want to avoid probate, and control the distribution upon death, then you’ll want a trust based estate plan over a will based estate plan.

Castle Wealth Group Legal in Media

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