But, what exactly goes in an estate plan? What’s the difference between a power of attorney and a living will? An AHCD or a POLST? An attorney-in-fact, a trustee, an executor, or a personal representative? The legalese can be daunting. 

We try to make it easier –  the differences between a will and a trust. 

First, the similarity: dispositive provisions

Wills and trusts are often confused because the most common type of trusts in America today are the type of revocable grantor trusts used in estate planning. So, one or the other, either the will or the trust, will have the terms that get the most attention–who gets what. Nevertheless, even though the most talked-about power of both lies in their dispositive provisions, each gets there in a very different way.

What is each, exactly?
A will is a creation of statutory law.

When you pass away, society needs some way to determine what to do with your affairs–and not just your possessions, but all your legal rights and obligations. So, each state has passed laws that identify a specific document, known as a last will and testament, whereby you can make those decisions. 

These statutes provide very specific requirements for execution, witnessing, and proof of execution. And, they provide very specific requirements and procedures for how to administer the will and the estate. Your last will and testament is your final, statutory word on your affairs. But, it is only that–it does not actually take effect whatsoever until you die and a court admits your last will and testament to probate, which is a public legal process.

A trust, on the other hand, is a product of contract law.

A trust is a relationship of trust whereby one person (called the “trustor,” “grantor,” or “settlor”) gives property (the “trust corpus”) to another (the “trustee”) to hold and manage for the benefit of a third person (the “beneficiary”). There can be multiple settlors, trustees, items of trust property, and beneficiaries involved. And, save for very few exceptions, the terms can be whatever the settlor wants them to be. As such, trusts are really founded on very simple contract principles and have almost as much flexibility as lawyers have imagination. 

Unsurprisingly, they tend to get more complicated when estate planning attorneys use them as an estate planning tool. This is mostly due to the fact that lawyers use legalese to split up property ownership rights between the right to control (holding title) and the right to benefit (being a beneficiary), allowing the same person to be settlor, trustee, and beneficiary. This is beneficial because, by naming successor trustees, you can make sure that the trust continues uninterrupted both after your life and during your life if you become incapacitated.

How do I prove that a will or trust is THE will or trust?

Wills are their own statutory creation. So, they have their own statutory rules. Although each state has its own specific statutes and rules, the first commonality is proving the will. Some things can be proven through oral testimony; not a will. Some through signature alone; not a will. And some through notarization; but not a will. 

Instead, a will must be proven by the affidavit of two witnesses who are both present at the time of signing, witnessed the signing, and understood that what was being signed was a last will and testament. Most states also allow for proof by holographic, or handwritten, will. And, while all states allow for the use of conventional wills, some have also recently adopted laws allowing for electronic wills.

Trusts, on the other hand, arise from contract law. As such, with very few exceptions, courts will simply defer to the trust terms for guidance. In legal parlance, we’d say that a court will first look within the four corners of the trust for answers and, only when it doesn’t provide them, will the law look outside the trust. 

So, for example, while a will can only be proven in one of the statutory ways, a trust can set its own terms for proof. In fact, the California Supreme Court, in reviewing a trust drafted by this author, just invalidated a later trust amendment because the offered amendment did not adhere to the trust’s proof requirements–it was not notarized and the trust required notarization. And, though every state is a little different, their courts have been unanimous in allowing settlors to set their own terms for their trusts. 

When does each take effect?

As you have hopefully already guessed, a will is not effective until you die. In fact, that is why we refer to LAST wills and testaments. Because you may execute many will and testaments during your life, but the only one that matters under statute is your LAST will and testament.

A trust, on the other hand, generally goes into effect immediately. This is because , in addition to post mortem planning, a trust also plans for your care in the event of incapacity during your life.

What are the differences in administration?

The administration of a will must go through court in a process known as “probate.” Every state’s laws and procedures for probate are different. However, they all have one thing in common: they are matters of public record. This means that any facet of your estate that has to go through probate can be found out by prying eyes. In addition, as you might expect, a full court process can get quite expensive and take a long time. 

The administration of a trust, on the other hand, more closely resembles that of any other contract. It is intended to proceed on its own, without judicial intervention. And, if there is a dispute requiring judicial intervention, courts are more careful to keep irrelevant or unnecessary details out of the public record. And, as one might expect, administration without oversight is far cheaper and faster.

What does each apply to?

Here’s the rub with trusts, though. As we said, a trust is a relationship between people and property. So, the terms of the trust only apply to trust property–not to everything. And, there are some things that a trust cannot control, such as nominating guardians for minor children, or naming executors to commence or continue litigation on your behalf after you die. So, even for estate plans with very robust trusts, you will still want a will. In most circumstances, this will be a pour-over will: a short will that addresses the issues that a trust cannot and that, otherwise, simply “pours over” any left over assets into the trust corpus.

The article was written by Ann Eberts, Esquire –  illuminote