Estate vs. Trust: What’s the Difference?
Estate planning and trust administration are two distinct legal processes that people often confuse. Both are important in the management and distribution of assets, but they serve different purposes.
In this article, we’ll define each, discuss their differences, and explore how our attorneys at KTF Law Firm can help you navigate each process with ease and peace of mind.
What Is Estate Planning?
Estate planning is the process of creating a plan for the management and distribution of your assets after you pass away.
Simply put, it aims to ensure that your assets are distributed according to your wishes—as efficiently and cost-effectively as possible.
Estate planning may involve
- Creating a will
- Establishing trusts
- Designating beneficiaries for retirement accounts or life insurance policies
- Naming a power of attorney
Here’s a list of other essential documents included in estate planning.
One of the top benefits of estate planning is that it allows you to control how your assets are distributed after you pass away. Without a plan in place, your assets may be distributed according to state law, which often does not align with your wishes or have your loved ones’ best interests in mind.
What Is Trust Administration?
Trust administration involves managing and distributing assets that have been placed in a trust. A trust is a legal arrangement in which a trustee holds and manages assets to benefit one or more beneficiaries.
Trusts are often created as part of your estate plan while trust administration involves carrying out the wishes of the person who created the trust.
Trust vs. Will
One of the main benefits of a trust is that, unlike a will, it allows your assets to avoid probate, which is a court-supervised process for distributing assets after someone passes away.
Wills go through probate because it is the legal process that ensures that a deceased person’s assets are distributed according to their wishes as stated in their will. However, probate can be time-consuming and expensive and the hearing process can take an emotional toll on your loved ones.
With a trust, your assets can be distributed directly to the beneficiaries without the need for probate.
Difference Between an Estate and Trust
The key difference between estate planning and trust administration is the timing.
- Estate planning is done before you pass away to ensure that your assets are distributed according to your wishes.
- Trust administration is done after you pass away to manage and distribute the assets that were placed in the trust.
Another difference between estate vs. trust administration is the level of complexity.
- Estate planning can be relatively simple or very complex, depending on the size of your estate, the types of assets you own, and your specific wishes.
- Trust administration tends to be more complex, as it involves managing and distributing assets according to the terms of the trust agreement.
Estate vs. Trust: Which Is Right for You?
As mentioned earlier, a trust is an essential part of estate planning. Therefore, by establishing a trust within your estate plan, you can ensure that your assets are managed and distributed according to your wishes, while also potentially reducing taxes and avoiding the probate process.
Trusts can also be customized to fit your specific needs and goals.
Overall, having an estate plan with a trust (or trusts) can provide peace of mind knowing that your legacy will be preserved and protected for generations to come.
How an Attorney Can Help
At KTF Law Firm, our team of experienced attorneys can assist you in creating an estate plan that aligns with your goals and wishes, including:
- Setting up trusts for your loved ones
- Supporting your favorite charity
- Safeguarding your assets from creditors
Whether you’re creating an estate plan for the first time or looking to modify an existing one, we offer a free consultation to answer your top questions and discuss your next steps.
