Wills and Trusts, What’s the Difference?

Wills and Trusts, What’s the Difference?

Wills and trusts are important items to have in an estate plan, as they help ensure your assets are protected, your family is provided for, and your end-of-life wishes are honored should you become incapacitated. Both are estate planning documents that meet the requirements of Missouri law to preserve your property, provide for your family, and lay out your wishes to make the administration of your estate as simple as possible and prevent disputes, but there are differences between them.

Without a clear estate plan, your assets will be distributed according to Missouri law, which means the people you wish to inherit assets may not receive them. Estate planning allows you to utilize methods such as a will or trust, that specify how you want your property to be divided among your beneficiaries.

Everyone should have a will, but not everyone needs a trust. While not essential, trusts can provide additional benefits like probate avoidance, greater control over distributions, tax advantages, incapacity protection, and asset protection that a simple will cannot accomplish in Missouri. They do have some disadvantages, however.

How do you know what estate plan is right for you? A consultation with an experienced Missouri estate planning lawyer can help you fully understand how each estate planning document works and how they apply in your individual situation. To get started, the following is an overview of the differences between wills and trusts.

What is a Will?

A will is a legal paper that states your wishes regarding the distribution of your assets when you die. You also can name the executor of your estate and guardians for minor children in your will.

In Missouri, a will is legal when it is signed and the signature was witnessed by two people who do not benefit from the will. If you want to change the terms of your will, you can do so by writing a codicil (an amendment) that must also be signed and witnessed in the same manner, or you can replace the original with a new will. You must be at least age 18 to write a will.

Some reasons for making a will include:

  • You can set the terms for distribution of your assets and decide who receives property instead of having the state of Missouri decide for you if you die without a will. Missouri’s intestacy laws section 474.010 have complicated rules which depend on whether you have a surviving spouse, children, or family members. If you have none, the property goes to the state.
  • A will allows a guardian and/or conservator to be nominated to care for any minor children.
  • You may be able to reduce probate costs by waiving bond and providing for independent administration or by establishing a trust in your will.
  • If you have a large estate, you can reduce or eliminate estate taxes with a properly drafted will.

What is a Trust?

A trust is an agreement that determines how property is to be managed and distributed during your lifetime and also upon death. You (as the grantor or trustor) create the trust and set up a trustee who holds title to the trust property and manages it according to the terms of the trust, for the benefit of your designated beneficiaries.

A “living” trust is a trust you create while you are alive. Typically, you will be the trustee and maintain control as long as you live, and you will also name a “successor trustee” to take over and manage the trust after you die. Your beneficiaries will receive the trust property when you die, without having to go through probate.

Trusts are most often set up to be revocable, so you can make changes to them. There are also irrevocable trusts that can’t be modified after they’re signed. These are used for specific goals, like reducing taxes, but they require giving up ownership and control of trust property.

Spouses may wish to create a shared living trust where the successor trustee then assumes control after both spouses have died.

What are Advantages and Disadvantages of Wills and Trusts?

The following are advantages and disadvantages you need to consider when setting up wills and trusts:

  • Costs. Wills are less costly to set up and easier to change. Trusts are more complicated and cost more money to create and change, but after death, they save beneficiaries time, hassle, and money, as the property in the trust does not have to go through probate and can be distributed to your beneficiaries almost immediately. Property left through a will might be tied up for long periods of time in probate court and could involve significant court costs and lawyers’ fees. However, there are other ways to avoid probate for certain assets, such as having payable-on-death designations to named beneficiaries on bank and life insurance accounts, but these techniques have potential problems.
  • Timing. A will takes effect after death, while a trust can take effect immediately during one’s lifetime.
  • Privacy. A will becomes part of the public record during probate, while a trust remains private.
  • Guardianship. A will allows you to name guardians for minor children, while a trust does not. However, a trust can transfer assets to adult beneficiaries or a trustee to manage for minors.
  • Disability planning: A trust can be used for disability planning by naming a successor trustee to manage the trust assets if you become incapacitated, which a will cannot do.
  • Tax planning: Certain types of trusts like irrevocable trusts can provide estate, gift tax, and tax advantages that wills do not offer.
  • Distributions: Trusts offer more flexibility in controlling how and when assets are distributed to beneficiaries.

Be aware that even if you have a trust, you will still need a basic will to name guardians for minor children, and you may need a will to transfer any leftover assets to the trust after death.

Get Help with Missouri Wills, Trusts and Estate Planning

Making decisions about estate planning can seem daunting, but whatever your situation, you can trust the Birk Law Firm to guide you through all aspects of protecting your assets and your loved ones. Attorney Kelvin Birk is a Certified Public Accountant as well as a lawyer, and this combined expertise allows our law firm to have deep knowledge of the tax and financial implications of your estate planning. You can count on us for personal, compassionate attention in determining what is right for you.

Do not delay. We offer a free consultation, so call us today at 573-332-8585 to get started with planning your estate.

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Attorney Kelvin Birk

Attorney Kelvin Birk

Kelvin Birk is a lawyer as well as a certified public accountant, with more than 30 years of experience in accounting and tax and business consulting, and more than 20 years of experience in numerous legal matters. This combined expertise allows our law firm to provide a level of service above that of other firms. Whatever your legal situation, your attorney at Birk Law Firm can counsel you as to the tax implications. We have experience in providing myriad legal representation services to residents of southeast Missouri and other areas.. [ Attorney Bio ]