By Mary Ellen Flynn, Esq., 301.563.6685
Many people who contact our firm for estate planning assistance often ask us to explain the difference between a Will and a Trust. Both are useful estate planning tools that serve different purposes. A properly drafted Will and/or a Trust will ensure that your property is placed in the right hands.
A Trust is a complex legal document that, when executed, creates a fiduciary relationship in which you give a person, called the Trustee, the right to hold title to property for the benefit of someone else.
That “someone else” can be you and you can name yourself as the Trustee. The Trust itself holds your property, which the creator of the Trust transfers into the name of the Trust. The Trustee then maintains the property for the benefit of the Trust beneficiaries. The Trust document identifies the purpose of the Trust, appoints the Trustee and successor Trustees, sets forth the responsibilities of the Trustee, and identifies the Beneficiaries and Successor Beneficiaries of the Trust. The Trust will detail the timing and frequency of distributions to the beneficiaries and can provide for contingencies in the event a Trustee or a Beneficiary dies or lacks the ability to properly manage their funds. The Trust becomes effective immediately upon execution of the Trust document and can exist for as long as desired by the creator of the Trust.
By contrast, a Will is a legal document that is effective only upon the person’s death.
If a person dies without a Will and they have property in their name (and not in a Trust), then their Estate is subject to Maryland’s intestate laws, which distributes the deceased’s property not based on the decendent’s wishes, but instead based on their kinship to other living family members. A Will is enforceable only if it is properly executed pursuant to the formalities required by Maryland law.
A Will is often much shorter than a Trust, and therefore less work and less costly to create. Nonetheless, it is still an effective estate planning tool. If you have minor children, you can include a clause in your Will that provides for your wish of who you would want to be the guardian of your children at the time of your death. By law, the courts place highest priority on the parent’s wish as set forth in their Will. Also, you can have your Will contain a Testamentary Trust in your Will, which is a Trust that comes into existence upon your death. This Testamentary Trust can then dictate the timing of distributions to beneficiaries which is very useful when your beneficiaries are minors or persons who cannot care for their own finances.
When we draft trust documents, we also usually draft a “pour-over” Will too. A “pour-over” Will can contain your nomination of the guardian of your children and it also “pours over” assets into your Trust that you forgot to title in the name of your Trust.
In general, both a Will and a Trust can be amended throughout one’s lifetime. The only instance where a Trust cannot be revised is when the Trust becomes Irrevocable, which occurs when the creator of the Trust becomes incompetent.
One reason why some may opt to establish a Trust instead of a Will is for the sake of avoiding probate.
Probate is a legal process where your Will undergoes examination by the Orphans Court to ensure that the property of your estate is properly distributed. Not only can the process be lengthy, expensive, and frustrating in the event a family member contests the Will, but the process becomes a matter of public record.
Many considerations go into determining whether to draft a Trust or a Will (or both). Three simple questions you may want to ask yourself are 1) “Who or What do I want to protect?” 2) “How do I want to accomplish that?” and 3) “When do I want this to take effect?”
About Andalman & Flynn, P.C.: Andalman & Flynn, P.C. serves clients throughout Maryland and the District of Columbia, offering compassionate, quality service and results-driven representation across a broad range of legal areas. With a concentration on disability benefits law and family law, the firm focuses on cases that impact the rights of everyone, and they are there for clients when responsive legal help is most critical. For more information about Andalman & Flynn, please visit http://www.andalmanflynn.com, or call 301.563.6685.