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Rarely does a workday go by that I am not asked, “What’s the difference between a Will and a Trust?”  There are many differences between the two, but first, it’s important to understand that at the most basic level, both of them are legal documents that inform the world, or those who need to know, how you want your assets handled and eventually distributed after your death.

Now, the differences…  A Will is a document that, after your death, according to law, must be submitted to the Probate Court so that the person that you name as a personal representative (sometimes known as an “executor”) may be formally appointed in that capacity.  Banks, insurance companies, etc. will not allow any transactions with your assets until they have an order from the probate court that identifies your personal representative and details his or her powers as personal representative.  Once submitted, your Will is a public document.  Your personal representative will work with the probate court to ensure that all of your remaining debts and final expenses are paid.  Once those have been paid, your assets will be distributed to the people or entities that you designated as beneficiaries.  Most of the time, the probate process is quite routine and takes between six months and one year.  Wills also may include nominations for people who you would choose as guardians for your minor children.

Trusts are more sophisticated documents that have a long list of benefits and options.  A revocable living trust is what most people think of when they hear the word “trust”.  Rather than naming a personal representative, you name a “trustee” to handle your affairs.  Many times, you are your own trustee as long as you are able to manage your affairs, but name a successor trustee to take over when you need the help or pass away.

The first common benefit of a trust is privacy.  Most of the time, a trust does not need to be filed with the probate court, and thus is not a public document.  This privacy can be valuable in instances of divorce, concern about creditors, or a desire to keep information about the size of your estate out of the public eye, among a host of other reasons.

A second common benefit is that you may control how and when your assets are distributed.  For example, you may not want your two children to each receive one half of your assets when they turn 18 for fear that they will likely spend all of the money on an ultra extravagant trip to Las Vegas or maybe a Ferrari.  Remember what you spent money on when you were 18?  A trust allows you to establish ages or other benchmarks upon which your children receive a lump sum with no strings attached.  Before they receive their proverbial “blank check” a trust can also allow for the trustee to pay for the beneficiaries’ basic necessities, such as medical expenses, education, housing, etc.

A third common benefit of a trust relates to your care during your lifetime. Without a trust, if you become disabled to the extent that you are not able to manage your own affairs, and someone must care for you, the probate court must appoint a guardian and conservator.  The guardianship and conservatorship processes can be tedious, intrusive, and expensive.  With a trust, your trustee is able to step in and assist you much more quickly and inexpensively.

The three benefits listed above are just a sampling of the endless possible benefits of a trust.  Trusts can also be very valuable if you are concerned about protecting your assets from nursing home expenses, if you have loved ones who have special needs or have difficulty managing their money, or if you would like to avoid paying unnecessary estate taxes.  Given the many factors and circumstances that vary from person to person, there is no such thing as a one size-fits-all trust or will.  Failure to consult with a competent estate planning or elder law attorney can have devastating financial and emotional effects on you and your loved ones.   I strongly urge everyone to meet with a qualified attorney to discuss what’s right for you.

Nick Reister is an estate planning attorney with Smith Haughey Rice & Roegge in Grand Rapids, Michigan. If you have questions about estate planning or other legal matters, please call (616) 774-8000.

The information contained on this site is for general information purposes only and should not be relied upon as legal advice. Please contact legal counsel to discuss your specific needs and circumstances.