WHAT ARE THE MAJOR DIFFERENCES BETWEEN WILLS AND TRUSTS?
  • WILL

    A Will is a unilateral statement by an individual, expressing that individual’s desires concerning the disposition of her property upon her death. The Will nominates a “Personal Representative,” who, upon appointment by the Court, has the power to administer the terms of the Will.

    Revocable (you can change or completely revoke it) anytime up to time of death.
    [Wills and revocable Trusts are the same in this regard].

    A Will is only effective upon death. It has no legal significance during a person’s life, and therefore a Will cannot provide for anyone to handle your affairs in the case of your incapacity. However, this power can be granted during your life via powers-of-attorney.

    Less expensive: about $500 for a plan for a married couple

    Requires Probate

    Invokes Probate filing fee ($150.00), and Inventory Fee (anywhere from a few hundred dollars to thousands).

    Invokes legal fees (about $2,500 -$3,000 if the estate is simple and there is no litigation. If there is litigation, fees can easily run into 5-figures)

    Generally simpler provisions (though a Will can be more complicated, it would generally be wiser and more cost efficient to do a Trust if complicated provisions are desired).

    A Will must be filed with the Probate Court and is therefore subject to “public” view.

    Because a Will’s contents are subject to review by anyone in the family, legal challenges to a Will are (at least theoretically) easier and more common, which could lead to costly probate litigation.

    No protection for estate from “Estate Tax.” Estate Tax refers to a separate tax imposed on assets that are distributed from an estate over a given worth.

    Wills may be used to “nominate” the guardian and conservator of minor children in the event of the death of both parents. This nomination must be made legal by the appointment of the court, but Michigan courts will strongly favor a nomination in a Will.

    Wills have no power to prevent a beneficiary age 18 or older from taking inheritance (except by invoking the Uniform Transfers to Minors Act, and then can only delay taking to age 21).

    Subject to “Estate Recovery” claim by the State of Michigan.

  • TRUST
    (Revocable Living Trust)

    A Trust is a private agreement between the person making the Trust (the “Grantor), and a person selected to administer the Trust (the “Trustee”). The Trustee does not require any appointment by the court in order to exercise her power to act.

    Revocable (you can change or completely revoke it) anytime up to time of death
    [Wills and revocable Trusts are the same in this regard].

    A Trust may (and usually does) contain provisions for use of the Trusts assets both during the Grantor’s life and upon his death. Thus, the Trust can provide for someone to handle your affairs in the case of your incapacity

    More expensive: about $3,000+ for a plan for a married couple

    Avoids Probate

    No fees because there is no probate of the estate.

    Legal fees are probable, because the Trustee is strongly advised to retain counsel to administer the Trust. The amount of legal fees would depend on complexity of the Trust, and whether there is any challenge to it.

    Provisions can be as simple or as complex as the circumstances require. This affects cost, but not as much as Wills because Trusts are more complex by nature.

    Trust is a private agreement, not subject to “public” view.

    Access to provisions of a Trust by anyone other than Trustee and beneficiaries is very limited, thereby restricting ability to challenge the document.

    Provides protection from Estate Tax through the use of multiple Trusts.

    The Trust itself may not be used to nominate the guardian and conservator of minor children, but a “Pourover Will” is usually included with a Trust, and the nomination can be made there.

    Grantor can direct Trustee to hold a beneficiary’s gift in Trust until beneficiary reaches any given age, or completes college, etc.

    Trusts provide protection from Michigan’s “Estate Recovery” law, by which the State can file a claim against a decedent estate for the cost of benefits provided by the State via Medicaid during the decedent’s lifetime. This is because under current (August 2012) law, the State can only make a claim against a Probate estate, and Trusts are generally not subject to Probate. There is no corresponding protection in a Will, because a Will must be probated.

THE INFORMATION ON THIS PAGE IS INTENDED FOR GENERAL INFORMATION PURPOSES ONLY, AND SHOULD NOT BE CONSTRUED TO PROVIDE LEGAL ADVICE, NOR DOES THIS DOCUMENT IN ANY WAY CREATE AN ATTORNEY-CLIENT RELATIONSHIP.