Key Differences Between Wills and Trusts

Estate Planning is a difficult topic for many to discuss.  By having your wishes honored in an Estate Plan, your assets will be protected in a timelier manner.  Most are familiar with a Will, and many have heard of a Trust, but they may not know what these legal instruments look like or how they can work to your advantage.  

Quite often, Wills and Trusts will work together. Understanding the purpose of these instruments and their differences is vital to planning, so let’s help break it down for you.

What Is a Will?

The Last Will and Testament is a legal document that outlines your wishes for the distribution of your assets after you are gone. 

A Will is the most basic instrument in an Estate Plan and most Estate Plans should include a Will. To be valid in Wisconsin, a Will must:

1. Be in writing.
2. Be signed and dated by you in the presence of two disinterested witnesses.
3. Proven after death. A Will can be proven by a self-proving affidavit or by testimony of witnesses in court.

The contents of a Will depend on your individual needs and desires. However, the Will should name a personal representative, outline asset distribution, and nominate guardians of any minor children.

What Is a Trust?

Traditionally, Trusts are used to hold assets for one or more Beneficiaries, and they may offer significant estate tax and other protective benefits. When you create a Trust you designate a trustee to manage the assets held in the Trust for the benefit of your beneficiary. Trusts can give you greater control over how your assets are managed and distributed.

The kind of Trust you establish will depend on your goals and needs.  Two types include Testamentary and Living Trusts.

Testamentary Trusts

A Testamentary Trusts is created by a Will. These Trusts are created after the death of the settlor, according to the terms of the Will.  Sometimes these are established for the benefit of minor children, relatives, etc.  A testamentary Trust can also be established to manage charitable distributions as well.  

Living Trusts

A Living Trust is created during the settlor’s lifetime. Often, the settlor is the beneficiary of this Trust and also the trustee. Upon the settlor’s death, the assets held in the Living Trust will be distributed pursuant to the Trust’s terms.

A Living Trust can be either revocable or irrevocable. A Revocable Living Trust allows you to modify the terms or revoke the Trust at any time during your lifetime. 

An Irrevocable Living Trust, on the other hand, is more difficult to change or revoke. However, it can offer greater asset protection and tax benefits than its revocable counterpart.

Do I still need a Will if I have a Trust?

Even if you have a Trust, your Estate Plan should still include a Will.  A “Pour Over Will” will distribute any assets held outside the Trust. This document will “pour” any assets not held in trust into the Trust for distribution per the Trust’s terms.  This means that the assets will reflect your priorities, not general legal default guidelines.

Choosing to create a Living Trust or Testamentary Trust will depend on your specific circumstances. Your Nowlan Estate Planning attorney can review your situation, options, and help you decide if a Trust is appropriate for your situation.

Contact the Nowlan Estate Planning Team for Assistance

Having a Will or Trust in place is important because, without it, your assets will be distributed per Wisconsin’s rules of Intestacy. These rules may not reflect your particular situation or the diverse needs of your loved ones.

Drafting a thorough Estate Plan can help secure your assets during life and your legacy after you are gone. A careful review of your options, your circumstances, and your wishes can be essential to making these planning decisions.

Contact us now to learn more and get started, so you and your loved ones can have peace of mind.