Minnesota Estate Planning: What’s The Difference Between A Will And A Trust?

If you’re reading this article chances are you have heard the terms “will” and “trust.” Though the words are frequently bandied about, they are often used without much explanation.

While most everyone is passingly familiar with the terms, it’s likely that few truly understand the differences between the two important Minnesota estate planning tools. The following will help shed some light on exactly what each does and how they differ from one another.

Difference #1 between Wills and Trusts

The biggest and most clear-cut difference between a will and a trust is that a will goes into effect only after a person’s death, while a trust takes effect the moment it is created. This differences goes to the very heart of what each device does; a will is a legal document which instructs others how to divide up your property after your death. It thus only comes into play when the creator of the will has died.

A trust, on the other hand, can be used to distribute property prior to death, at death or even years later. The moment the trust is created the person who has been designated “trustee’ takes legal title to property for the benefit of another person or persons, known as beneficiaries. Unlike a will, trusts control property at the time the transfer is made and do not require death to act as a trigger.

Difference #2 between Wills and Trusts

Wills and trusts also differ in the property they are able to exert control over. A will can only be used to manage property that is in the name of the deceased at the time of his or her death. Wills cannot cover property that is held in joint tenancy with others or that is kept in a trust.

By the same token, the authority of a trust only extends to those items that have been directly transferred into the name of the trust. Once an item or group of items have been transferred to a trust, the trust then “owns” that property and its authority extends only over those specific items.

Difference #3 between Wills and Trusts

Another crucial difference between wills and trusts is that wills pass through the Minnesota probate process. This means that a court will watch over the distribution of assets according to the terms of a will, ensuring that the document is valid and that assets are properly handled.

Trusts, on the other hand, pass property outside of the probate process so a court does not oversee the distribution process. Assets held in trust can be distributed to beneficiaries after the death of the grantor without any fees or interference from the court, something which shortens (and often cheapens) the process. However, not everyone needs to avoid probate. For instance, if you don’t own much property, or if you have many debts, creating a trust may not be necessary. Another benefit of avoiding probate is that unlike wills, which are public record, trusts remain private.

Pros and Cons of a Minnesota Will or Trust

Both wills and trusts have advantages and disadvantages that should be discussed with an experienced Minnesota estate planning attorney. For example, wills are great in that they allow you to do things like name a guardian for your children, something that cannot be done with a trust. Trusts are excellent tools for saving money on estate taxes; something wills are essentially useless at accomplishing. The two items should not be viewed as mutually exclusive, but instead two components that can work together to create a comprehensive estate plan.

Though it may be confusing, creating an effective estate plan does not have to be an overly complicated process. An experienced Minnesota estate planning lawyer can help walk you through the process of establishing or updating a will or trust. For more information on estate planning in Minnesota, along with a variety of other topics, contact Joseph M. Flanders of Flanders Law Firm at (612) 424-0398.

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