I get asked a lot, “What is the difference between a will and a trust?” I get asked that almost every day. The difference is this: If you have a will, and your assets pass through that will, your estate will be probated. Lots of folks want to avoid probate. I probate lots of estates. Some are very complicated and costly, and some are not. Most folks want to avoid probate because of that cost and the complication of it. If you have a trust, and your assets passed through the trust, and therefore, they do not have to go through to the will or through the court, then you will not have a probate.
The reason for that is this: A lot of folks don’t know, a lot of attorneys don’t know this, the reason your assets that pass through a trust do not go through probate is because your trust does not die when you die. Your trust continues to live on. You’ve appointed a new trustee, something called a successor trustee. That successor trustee literally just picks up the torch, and the trust lives on. Then the successor trustee’s job is just to do those things that your trust says they’re to do. It’s called trust administration, and basically, they’re instructions. “This is what’s supposed to happen after I pass. Give the following things to the following people, pursuant to the trust directions.”
They do that, and you do that outside of probate with an Trust. That’s why sometimes we prepare trusts for folks for their estate planning; is they want to avoid probate, and they have assets that need to be passed on that they can’t do it with either just a beneficiary designation. Again, the whole idea is to avoid probate, so we put things in the trust to do that.
We can get into all kinds of other things, because there’s also tax avoidance that is sometimes at play, although, most estates that I deal with anymore, tax avoidance isn’t a problem. The government has allowed us to transfer more wealth, more assets to our heirs, much more, than we used to be able to pass without their being any estate tax. Now, a single individual can pass almost $5.5 million in assets to their heirs and there not be any estate tax on that.
In most cases, folks don’t have estate tax concerns, so the trust is simply to make for ease of administration and avoid probate.