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Wills and Trusts: Both Important but Very Different

We often hear a lot of confusion regarding the terms "will" and "trust", with some folks even thinking that they are one and the same, which is definitely not the case. Though both are key elements of estate planning, they serve distinct roles.

A will only goes into effect after the will's creator  - also known as the testator - has passed away. The person then responsible for carrying out the desires of the testator and distributing assets to the beneficiaries is referred to as an executor. Executors are in charge of wills, not trusts.

So, whats a trust? A trust is a legal arrangement under which one person or institution, called a trustee, holds legal title to property that will eventually be distributed to beneficiaries. Unlike a will, a trust can be "active" the moment it is created. It may be used to distribute property to beneficiaries prior to the death of the trust's creator (settlor), upon the death of the settlor, or delayed well after the death of the settlor.

Another key difference between a will and a trust is that a will must pass through probate, which is the court supervised process of establishing the validity of a will, locating and determining the value of assets owned by the deceased, paying the decedent's outstanding bills and taxes, and distributing the remaining assets to the will's beneficiaries or heirs. A trust does not go through probate. An estate may have some parts that pass through probate and others that pass through a trust. In addition, a will becomes public record; a trust can remain private.

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