Guide to Will vs. Trusts
South Carolina residents seeking to create an estate plan have many options. In particular, they can decide how to leave property to their beneficiaries after death. The two most popular options are wills and trusts. In this article, Surasky Law Firm investigates both options and invites you to reach out to talk with our Aiken, SC, estate planning lawyer if you have questions.
Terminology of Wills and Trusts
To better understand your options, you need to understand some key terms first:
Testator. This is the person who creates a will. In South Carolina, they must be at least 18 and of sound mind.
Beneficiary of a will. This person receives the property left to them by will.
Personal representative. This person shepherds the estate through probate after the testator’s death. The testator should name someone in a will to serve in this capacity; otherwise, the probate court can appoint someone.
Probate. This is the legal process for settling an estate. The personal representative collects the estate assets and pays off the testator’s debts. At the end of the process, the remaining estate assets are distributed to beneficiaries under the will.
Grantor. This is the person who creates a trust.
Trustee. This person manages the assets placed in a trust. For example, money might be invested, or real estate needs insurance and repairs.
Beneficiary of a trust. This person receives the benefit of the assets placed in a trust. For example, they can receive money or the assets themselves.
What Does a Will Do?
A will is a simple legal document. The testator lays out who he or she wants to inherit their assets when they die. For example, a testator might want her daughter to inherit everything. She can create a will and leave 100% of her estate to her daughter.
Other testators like to leave individual pieces of property to multiple people. A testator might leave his house to his cousin, two bank accounts to his sister, and his home to his son.
Testators have a lot of power to leave their assets to whomever they want. They can also disinherit their children and other family members—though they can’t entirely disinherit a spouse without consent.
In addition to leaving assets to beneficiaries, a will can:
Appoint a personal representative and any alternates
Name guardians to raise minor children in the event the parents die
Note: A will is not a living will, despite the similarity in name. Our clients use a living will to identify what end-of-life treatment they desire, such as a feeding tube or respirator. Learn What is a Living Will here.
What is a Trust?
Put simply, a trust is a legal arrangement for holding property. It sounds confusing, but it’s not.
Let’s say you own your home. You can transfer it to a trust. The name of the trust will go on the deed as the owner. In the trust document, you identify someone who will enjoy the benefit of the house (the beneficiary). You also name someone to manage the property, such as fixing the roof and mowing the lawn (the trustee).
The simplest trust is a living trust. As grantor, you create this trust while alive. You can also name yourself as the trustee and as the beneficiary. Essentially, nothing will really change if you do that. However, you also identify who will inherit the property after your death, and you name a trustee who will step in when you pass.
In this way, a living trust is a substitute for a will. It works like a will because it is an effective way to leave property to someone when you die. As an added benefit, you can choose to take an asset out of a living trust whenever you want.
Other Trusts
A revocable living trust (described above) is the simplest trust to create. It gives the grantor a lot of options. You can easily revoke it or move property in and out of the trust. But a living trust isn’t the only type of trust available in South Carolina.
An irrevocable trust is quite different. It is hard to change or revoke once created. You name a third party as trustee, who could be a bank, financial advisor, or trustee corporation. They will manage the assets in the trust.
There are many types of irrevocable trusts. Some of our clients like them for the tax advantages they offer. Because the trust is irrevocable, the government does not consider trust assets part of your estate for tax purposes. Indeed, most of our clients who create irrevocable trusts do so for tax advantage. You should consult an attorney if you are interested in tax savings.
Will vs. Living Trust: Which is Better
Let’s take a closer look at the differences:
When you die, your will is probated in probate court. However, your trust is not probated. That means your beneficiaries under a trust can probably receive assets faster.
You cannot leave assets to a pet in a will because animals cannot inherit in South Carolina. However, you can use a trust to make provisions for the care of a pet after you die. You can name someone to take possession of your pet and leave them assets. You can also tell your trustee to check in on your pet regularly to make sure it is being taken care of.
A trust is private, so no one can find out how much you own at death. By contrast, a will goes through probate, which is a public process.
If you want tax savings, you can use an irrevocable trust. There are no tax savings to leaving assets to beneficiaries in a will.
You can do more with a will, such as nominate guardians for your small children.
A will only becomes effective at the testator’s death. A trust is immediately effective.
You Can Have Both a Trust and a Will
The good news is that we can create both a will and a trust for our clients. There is no reason to pick between them! For help creating an estate plan, call Surasky Law Firm today to speak with our Aiken, SC, estate planning attorney.
