When it comes to estate planning, many people assume a will is all they need. But oftentimes, a trust can offer more control, privacy, and flexibility. So, how do you decide which one you need or if you need both?
This blog post is for informational purposes only and does not constitute legal advice. Estate planning laws vary by state, and individual circumstances differ. You should consult with a qualified estate planning attorney to determine the best approach for your specific needs.
What is a Will?
A will is a legal document that outlines who should receive your assets when you pass, who will manage your estate, and who will be the guardian of your children (if applicable).
A will is simple and cost-effective to create, making it often what people initially do. It allows you to clearly state any final wishes you may have and name the new guardians for your children if they are minors.
An aspect of a will that often makes people consider a trust is that it must often go through probate, a time-consuming and public process. It can also only take place after your death and does not protect against incapacity. It can also be challenged in court, which could go against the wishes you had.
While online tools can help you write a will, having a lawyer assist ensures it’s done correctly and follows state laws. Mistakes in a will can lead to confusion or disputes later on.
What is a trust?
A trust is a legal entity that holds assets for the benefit of others. The most common type of trust is a revocable living trust, which you create during your lifetime and can change to revoke as you see needed.
A trust allows the assets to pass directly to beneficiaries not having to go through probate. It would not be a public process either; there will be no public record like a will would have. A revocable living trust also takes effect during your lifetime, allowing for management of your assets if you become incapacitated. Additionally, a trust offers far more control over how and when your assets are distributed. For example, you can set that your beneficiary can not receive inheritance until a certain age or after achieving an important milestone. They are helpful in complex situations such as second marriages or helping provide for a loved one with special needs.
A trust is generally more expensive to set up than a will. Often, you need to meet with an estate planning attorney to create it. There is also more work involved – once it has been created, you must now “fund” it by transferring your assets into the trust’s name, which can be a time-consuming process. If assets do not move into the trust, you will likely have to go through probate. If you have a simple estate, this process may not be necessary due to the ongoing maintenance and complexity of it.
While it’s possible to create a trust using online tools, it’s usually better to have an attorney help you. Setting up and funding a trust can be tricky, and a lawyer can make sure everything is done right and follows your state’s laws.
Which one is best for you?
Oftentimes, it is hard to decide which one may suit you the best. A will may be the best estate plan for you if you have simple assets, you would like to name guardians for minor children, or you are just starting your estate plan. It would be a cost-effective starting point and ensure that your wishes are documented and honored. An estate planning professional can be a helpful resource to help build the right plan for you! Included at the bottom is a guide to issues to consider when creating your estate plan.
A trust is often the better choice if you would prefer to maintain privacy and avoid probate, as well as have more control over how your assets are distributed. Trusts are quite useful for people with property in multiple states, who have blended families, or who want to set up conditions to receive inheritance. A trust also gives you protection in the event you become incapacitated, giving the successor trustee management over your affairs without having to go through court.
In most cases, the best solution would be to have a will as well as a trust. A trust can handle distributing your large assets, while a “pour-over will” can make sure that any assets not stated in the trust will still be handled according to your wishes. This could also take care of legally naming guardians, which is something a trust does not do.
Overall, the perfect estate plan depends on your specific financial situation and goals. No matter what age you are, having an estate plan is one of the smartest financial decisions you could make. It is all about ensuring your wishes are being honored and protecting your loved ones! If you are looking to have a conversation about which option, a will or a trust, is right for you, please reach out to us and set up a meeting to discuss options.
Free Download: Issues to Consider When Creating Your Estate Plan
