What is the difference between a Will and a Trust?

July 31, 2024

Deciding between a will and a trust depends on your estate’s complexity, control preferences, and asset distribution goals. For instance, if Mr. Kumar has a straightforward estate with minimal assets and wants to ensure his car and savings are distributed to his children after his death, a will is a simpler and more suitable option. On the other hand, if Mrs. Verma has substantial wealth, including properties, investments, and a business, and wishes to manage these assets and provide for her family across generations, creating a trust would offer her greater control and protection for her assets. Thus, a will is ideal for straightforward estates, while a trust is better for managing and protecting more complex and substantial estates.

Here, we give the differences between a will and a trust-

Feature	Will	Trust
Definition	A will is a legal document where a person (testator) states how they want their assets distributed after they die.	A trust is a legal arrangement in which one person (trustor) gives another person (trustee) the right to manage their assets for the benefit of someone else (beneficiary).
	For example, Mrs. Gupta wants to write a will specifying how her assets should be distributed after her death. She may state that her house should go to her son, her jewelry should go to her daughter, and a sum of money should go to a charity. She appoints her friend as the executor of the will, who will ensure that her wishes are carried out as per the instructions in the will.	For example, If Mr. Sharma wants to ensure his wealth is managed and used for the education of underprivileged children, He can create a trust, “Sharma Educational Trust,” where he transfers some of his assets to the trust. The trust deed specifies that the trustees, who could be a group of individuals or an institution, will manage these assets and use the income generated to provide scholarships to underprivileged children.
Governing Laws in India	All wills (except those of Hindus, Mohammedans, Buddhists, Sikhs, and Jains) are governed by the Indian Succession Act of 1925. Registered wills are legally binding, and properties not mentioned in the will follow personal succession laws.	Trusts are governed by the Indian Trusts Act of 1882.
Registration	A registered will is legally binding and helps avoid disputes. Registration will not be mandatory but advisable.	Trust deeds must comply with relevant laws, and amending any part of them might require court permission.
Scope of Governance	A will governs the distribution of the mentioned properties; the remaining properties follow applicable succession laws.	Trusts ensure assets are managed as the trustor wishes, often avoiding the probate process.
Amendments	A will can be changed by a codicil under the Indian Succession Act of 1925.	Trusts generally cannot be changed unless explicitly allowed, governed by the Specific Relief Act of 1963.
Eligibility	Any adult of sound mind.	Any person competent to contract and minors with the court’s permission.
Purpose	To specify how a person’s assets are distributed after death.	To manage and protect assets for beneficiaries according to the trustor’s wishes.
Purpose	As mentioned above,Ms. Mehta wrote a will specifying that after her death, her house should be given to her son, her savings to her daughter, and a sum of money to a charitable organization. The primary purpose of her will is to outline how her assets should be distributed among her chosen beneficiaries.	For example, Mr. Singh creates a trust, “Singh Family Trust,” and transfers his property and investments into the trust. The trust deed states that the assets should be used to provide for his children’s education and to support his elderly parents. The trust also specifies that the assets should be managed and invested to generate income for the beneficiaries. The trust’s primary purpose is to manage and protect these assets according to Mr. Singh’s wishes, ensuring his family’s ongoing support and financial stability.
Approximate Cost	Writing a will can cost between ₹5,000 to ₹20,000, depending on complexity and legal fees. Writing a will costs nothing if you don’t go for registration.	Setting up a trust is more expensive, ranging from ₹10,000 to ₹50,000 or more, depending on complexity and legal fees.
Asset Protection	Wills do not protect assets from personal liabilities.	Trusts protect assets from personal liabilities, ensuring they are used as intended for beneficiaries.
Asset Protection	For example, Mr. Rao writes a will stating that his daughter should inherit his house after his death. However, if Mr. Rao has personal liabilities, such as unpaid debts, creditors can claim his assets, including the house, to settle these debts before any distribution to his beneficiaries. Therefore, the house may need to be sold to pay off creditors, leaving his daughter with less or nothing from the estate.	For example, Mr. Patel created a trust called “Patel Family Trust” and transferred his assets, including his house and investments, into the trust. He specifies that the trust is for the benefit of his children and that the assets should be used for their education and welfare. By doing so, the assets in the trust are legally owned by the trust, not Mr. Patel. If Mr. Patel incurs personal liabilities or creditors pursue him for debts, the assets within the trust are protected and cannot be used to settle his personal liabilities. The assets remain intact and are used as intended for the beneficiaries, ensuring his children’s financial security.

The views and opinions expressed in this blog are those of the author. All content provided is for informational purposes only and should not be taken as professional advice.

Tags: personal finance, trust, Will

Aditya Chopra

Managing Partner, Victoriam Legalis - Advocates & Solicitors

What is the difference between a Will and a Trust?

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