A will and a trust are both estate planning documents that are used to distribute a person's assets after their death, but they function in different ways and serve different purposes. The best way to illustrate the differences is to consider how some famous people used wills and trusts to achieve their goals: Elizabeth Taylor and John F. Kennedy Jr.
Elizabeth Taylor Used Living Trusts to Keep Her Affairs Private
Elizabeth Taylor was one of the highest-paid actresses of her time and also had a successful business career, including her own line of perfume and jewelry. Taylor's net worth at the time of her death in 2011 was estimated to be around $600 million. Due to investments, it could have been valued at up to $1 billion, but we will never know the true figure because she used living trusts to avoid the probate process.
Taylor was married eight times and was known for giving a significant amount of money to charity throughout her life. She supported a wide range of causes, including AIDS research and treatment, children's welfare, and the fight against hunger and homelessness. In 1991, she founded The Elizabeth Taylor AIDS Foundation to continue her efforts. Taylor also supported organizations such as the United Nations Children's Fund (UNICEF), the Motion Picture and Television Fund, and the Elizabeth Taylor Medical Center in Malawi. The money Taylor gave to philanthropic causes was not taxed.
The Difference Between a Living Trust and Irrevocable Trust
Taylor avoided probate by creating trusts. A trust is a legal arrangement in which a person transfers their assets to a trustee to manage for the benefit of a beneficiary. The trust can be set up during the trustor's lifetime or through their will. A trust can be used to manage assets during a person's lifetime and after their death. A trust can also provide for the management of assets for minor children or beneficiaries who may not be able to manage their inheritance on their own.
There are two main types of trust: revocable (living) trusts and irrevocable trusts. A living trust, also known as a revocable trust, is created during the lifetime of the person who creates the trust. Taylor used living trusts to manage her assets during her lifetime. Upon the trustor's death, the assets in the living trust are distributed to the beneficiaries according to the terms of the trust.
An irrevocable trust, on the other hand, is a type of trust that cannot be changed, modified, or revoked once it has been created. The trustor gives up control and ownership of the assets that are transferred to the trust.
A Living Trust Managed by Taylor’s Son
Taylor created a living trust and made her son Christopher Wilding the Trustee. If she had left her estate to him in a will, it would have been filed for probate and the public could have known all the details. A will goes through probate and some aspects of it become a public record. (However, having a will is still better than dying without one, because the probate process is even slower without a will and the person’s wishes are subject to the dictates of state law. You can use FastWill to create your will today and avoid letting the government decide what happens to your property).
Despite Taylor’s desire to keep things private, one of her beneficiaries did speak out. Her last husband, Larry Fortensky, told the Daily Mail that she had left him $825,000. Fortensky was on good terms with Taylor despite their divorce. Taylor’s other beneficiaries have stayed mum. Taylor presumably passed assets to her children and grandchildren and continues to distribute money to charities. Taylor made a deal with Christie’s in 2006 to have the auction house sell her property and personal items in exchange for a line of credit. Christie’s auction of her items also helped fund the American Foundation for AIDS Research.
John Kennedy Jr.’s Will Left Assets to His Nieces and Nephew
John F. Kennedy, Jr. and his wife, Carolyn Bessette died in a plane crash in July of 1999. It’s unusual for a married couple to die in the same event, but the tragedy underscores why it’s important for a will to name alternate beneficiaries in case the other spouse dies at the same time. His will provided for this circumstance. It reads:
“I give all my tangible property (as distinguished from money, securities and the like), wherever located, other than my scrimshaw set previously owned by my father, to my wife, Carolyn Bessette-Kennedy, if she is living on the thirtieth day after my death, or if not, by right of representation to my then living issue, or if none, by right of representation to the then living issue of my sister, Caroline Kennedy Schlossberg…”
The phrase “to my then living issue” means that if Carolyn did not survive him, he wanted his children to inherit his estate. Since Carolyn did not survive him and they had no children, JFK Jr’s will gave most of his property to his sister’s three children. The estate was estimated to be worth around $100 million.
We know all this because the will was filed in Manhattan Surrogate’s Court shortly after his death. A will is a legal document that outlines a person's wishes regarding the distribution of their assets after they die. It names an executor to manage the distribution of assets and it must go through a probate process to be validated by a court. John’s will named his cousin Timothy Shriver as executor.
John Jr. obviously thought a great deal about what to include in his will. Caroline Kennedy Schlossberg’s children inherited JFK’s Manhattan apartment and his share of his mother’s Martha’s Vineyard estate. The only specific bequest of personal property in the will was a scrimshaw set that had belonged to President Kennedy. John Jr. left it to his nephew, who was six years old at the time. The will reads “If I am not survived by issue, I give said scrimshaw set to my nephew John B.K. Schlossberg, if he is then living…”
He also gave money from a trust to 14 family members and friends. In addition to money given to Caroline and her children, he gave money to his assistant, his childhood governess, his cousins, and his godchildren. He also left trust money to a Kennedy charity dedicated to people who have developmental disabilities.
A Lawsuit Against the Estate of John Kennedy Jr.
Even when an estate plan is well crafted, a person’s estate can still be sued in court. Carolyn Bessette’s sister Lauren was also killed in the plane crash. The three were on their way to a wedding in Hyannisport and John Jr. was flying the plane. The NTSB eventually determined that pilot error had caused the crash. Investigators said Kennedy lost track of the position of the plane due to the hazy and darkness of the night sky. Ann Freeman, the mother of Carolyn and Lauren Bessette, sued the Kennedy estate for wrongful death. After an 18-month negotiation, his estate settled the claim. Although some reports indicated that the settlement was for $15 million, the settlement amount was never made public, probably because the parties agreed to keep the settlement confidential.
As you can see, a will outlines a person's wishes for the distribution of their assets after they die whereas a trust is a legal arrangement in which a trustee manages assets for the benefit of a beneficiary during a person's lifetime and after their death. Both documents can be useful tools in estate planning and some people use both, like John Kennedy Jr. FastWill can help you determine whether a will, trust, or combination of both is best for your individual situation.
