There is no such thing as a stupid question (I still don’t know where or what exactly the Netherlands are, so help me out). What is the difference between a will and a trust you ask? That is not a stupid question, and I will tell you here.
Both documents are great and essential estate planning tools, and they can also work together, but there are differences.
The first difference between the two is that while both are created during the lifetime of the maker, a will takes effect only upon death, while a trust will take effect immediately. What do I mean by this? Both the will and the trust are used for the distribution of assets, they each have a legal representative who makes the distributions; however, the will can only distribute assets upon the death of the testator (the person who makes the will). On the other hand, the trust may begin, through the trustee according to the terms of the trust, to distribute the assets during the life of the trustor (person who made the trust), at the time of death of the trustor, or some other time later on after the death of the trustor when a condition has been met.
Another difference is between how and to whom the assets are distributed. Under a will, the assets are distributed to the devisees/legatees. This occurs when the testator dies. A trust has beneficiaries, and these beneficiaries may receive assets before, at, or after the death of the trustor. Great, we already know that, but one nuance to this is that the beneficiary may also receive income from the trust prior to the death of the trustor. This is governed by the terms of the trust, but a trust may distribute income, as well as the assets themselves, to the beneficiaries.
One thing a will can do, but a trust cannot is distribute assets that are in the name of the testator. A trust can only distribute the assets that are titled in the name of the trust. For example: Bill owns three pieces of land, all in his name. He transfers one into his trust, and the other two he does not. The trust can distribute the property held in the trust, but has no bearing on other two pieces of property. The will can distribute those.
Now, this is an occasion where the documents can work together. A will can designate that all property of the testator shall be distributed to the trust at the death of the testator. Once the property has been put in the trust, the terms of the trust take over to govern the rest of the distribution. A will of this type is called a pour-over will.
These are a few of the differences between the two documents. I hope you have a little bit better of an understanding of how these work, how they are different, and how they can work together. They are both great planning tools, and should be utilized together.
Eifert Law Firm
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