San Antonio Express-News
March 4, 2003

Difference Between Trust & Will

copyright 2003, Paul Premack

Perhaps the best place to start is to define terms. A "trust" is a property management arrangement in which one person (the trustee) manages assets for the benefit of another person (the beneficiary). Trusts can be revocable or irrevocable, tax-motivated or tax-neutral, testamentary or inter-vivos. A "living trust" is a special trust subcategory – it is revocable, tax-neutral and operates both during and after the lifetime of its creator.

At its inception, a living trust’s assets are usually managed by its creator unless he or she becomes disabled. Then an alternate trustee takes over, and uses the trust assets to pay bills, to buy food, and to provide shelter and care for the trust creator. When the trust creator eventually dies, the alternate trustee enacts provisions that identify alternate beneficiaries, distributing assets to specific individuals.

On the other hand, a "Will" is a purely testamentary legal tool, effective only after its maker dies. In the Will, its maker named specific heirs, defined what they will receive, and appointed an Executor to handle the work. Although a Will can contain a trust (to impose restrictions on certain heirs) that trust operates only after the Will has been probated.

Probate is the legal process through which a Will is activated and the Executor receives legal credentials to act for the decedent’s estate. A properly drafted Will can streamline the probate process by eliminating court supervision of the Executor, who completes the decedent’s remaining business and distributes the remaining assets. Sometimes the Will’s maker desires court supervision or fails to waive it. If so, probate can become a slow, detailed process.

After-death distributions under a living trust are usually implemented privately, without probate. This works because the trust creator, while still living, transferred assets into the name of the trustee. For example, any real estate owned by the trust creator should have been deeded to the trustee at about the same time the trust was created.

This concept, called "funding" the trust, is what eventually avoids probate. Assets that were transferred to the trustee are under the trustee’s legal control. The death of the trust creator does not change that control; rather, it is a signal to the trustee to enact the provisions identifying alternate beneficiaries. If any assets were not transferred to the trust, those assets may still pass according to the Will. Thus, a living trust is not an absolute guarantee that there will not also be a probate.

Someone must have legal authority to act on behalf of the decedent when distributing the estate. Whether that authority is obtained via a trust agreement or obtained via probate, the decedent’s instructions on who-gets-what must be fulfilled. Taxes and debts must be discharged. Accounts must be finalized and funds distributed. Deeds to real estate must be signed and recorded.

Wills are less expensive initially, but usually require probate. Living trusts are more expensive initially, but usually avoid probate. They are two different roads to the same destination. Which road you select depends on your individual needs and preferences.