People hear both terms and generally think that they’re either the same or interchangeable. There are distinct differences between the two and those differences are how you’ll be able to decide which one you want to be the foundation of your estate plan. Let’s dive into the differences between a will and a revocable living trust without needing a dictionary.
What Is a Will and What is a Trust?
First, it’s important to discuss what exactly a will and a living trust are in layman’s terms. A will is essentially a set of instructions that someone creates that tells the court where they want their stuff to go because they’ve passed away. The instructions put someone in charge of passing their items out to the named individuals or companies after taking them to the court to be recognized as real instructions. A revocable living trust is also a set of instructions, but it’s much more detailed. The trust can be thought of as a backpack or a purse where you put all of your items inside. On the outside of the bag are instructions that say how the items inside are to be used and for what purpose if you’re unable to do so yourself.
The Biggest Difference Between a Will and a Trust
Now that we’ve gotten that out of the way, I want to address the biggest difference between the two. A will takes effect after someone has passed away, while a trust is used to take care of someone while they’re alive and distributes how things are handled after they’ve passed away. So imagine there’s a situation where someone has suffered a bad illness or accident, and they’re unable to speak or act for themselves and they need someone to make all of the decisions for them. A will doesn’t cover that. A trust, however, can be used for that exact purpose. After the creator of the revocable living trust is in a condition where they can’t take care of themselves, a person (or company) that they select steps in and will follow the instructions they’ve laid out for them for their care. They can describe how much money can be spent on groceries, utilities, bills, as well as make funds available for the care of others if they choose. Without those instructions, a power of attorney is left to make these decisions on their own without specific, written guidance.
A Trust Can Help During Incapacity
Another difference between a will and a revocable living trust is that a will becomes public when it’s used, while the trust is private. In order to use the will, it must be filed with the court to begin a process called probate. As part of that process, the will becomes part of the record and most counties in Texas have their public record easily accessible on the internet. That means that anybody, and I mean anybody, can review your filed will and see who is receiving something. A trust on the other hand is a private document that’s kept between the family and the attorney. After passing, the next in charge takes the trust to the attorney’s office to be administered. That means that the family is allowed privacy during a difficult period of their lives and the chances of receiving a lot of calls from investors wanting to “make an offer” is significantly lowered.
Planning for Minor Children
A simple will, by itself, cannot be used to leave anything to a child under the legal age, while a revocable living trust can make accommodations for the minor child. I know, that’s kind of confusing to read, so let’s simplify it even further. In Texas, minors can’t own property or enter into a contract. So if someone has minor children and they pass away, they’ll have to have an adult take control of the property for the child and essentially take care of the child. A simple will cannot do that on its own. The court would have to create a trust, appoint someone to be in charge of the property for the child, and usually have the trust terminated when the child reaches legal age with the child receiving a lump sum at that time. Now if someone set up a revocable living trust ahead of time, that person can create terms and conditions for when the child will have access to the funds and for what purpose. Also, they’ll be able to name who will be in charge of administering the funds to the child when the time comes.
Which One is Better: a Will or a Trust?
Working while still alive, privacy, and care for minor children are only a few of the differences between a will and a revocable living trust in Texas. Ultimately, I don’t think that one is better than the other as I strongly believe that having a plan, any plan, is better than no plan at all. The decision between using a will or a revocable living trust as the base of an estate plan is the one that works best for you and your family and will be utilized when needed.