As the Foundation makes presentations to various congregations — usually right after worship services — one of the questions we hear most frequently is, “What is the difference between a will and a trust, and how do I know which one I need?” While determining your own needs are best explored with your professional advisors, we can help you in understanding the difference between a will and a trust.
A will is a legal document that directs your Personal Representative on the specifics of the distribution of your estate. We often hear “I don’t have an estate,” but everything you own makes up your estate. The will tells your Personal Representative to settle bills you owe, indicate your funeral arrangements, and direct the distribution of your assets. You can name family members to receive specific items, specific dollar amounts, or a percentage of your total estate after bills are paid. You can also name your Church, the Foundation, or other nonprofits you support to receive something through your will. Although your will is a legal document, it is changeable throughout your life, so naming a nonprofit in your will does not qualify you for an immediate tax deduction — although it can reduce your estate if estate taxes come into play.
An Arizona estate of more than $75,000 will be processed through the Probate Court if governed solely by a will. Because a will becomes a public document when in Probate, others can request and receive a copy of the will. For that reason, alone, many people opt for a trust.
A trust — and there are many, many types of trusts — is a separate legal entity. It has its own federal ID number for paying taxes. A trust may be funded with everything you own or with just one specific asset, like real estate. A trust is often established with an eye to avoiding taxation, which might be income tax or capital gains tax or gift tax or estate tax. There are so many types of trusts it is hard to generalize, which is why anyone considering a trust should visit with a knowledgeable attorney.
Interestingly, if you do establish a trust, you will probably also have a will. That will might simply refer to the trust and not disclose any distribution information. A trust document is not public.
Whether you need a will or a trust or both is a decision to discuss with your immediate family and a trusted legal advisor. The Foundation’s website has information about wills and estate planning that you may find useful as well as articles in the newsletter below. As always, the Foundation is happy to assist in whatever way we can as you explore the best options for your charitable giving.