How do trusts and wills work?
Let us first define the words so we can better understand the legalese on wills and trusts.
A trust is a fiduciary agreement that allows you, the trustor, to arrange how and when your assets will be given to your beneficiaries. A trustor creates the trust and appoints a trustee who acts as the manager for the assets that are put into the trust. The trustee you designate makes decisions and acts as the custodian of the trust until its assets can be passed on.
A will is a legal document that expresses your wishes regarding the distribution of your assets when you pass away. Probate is the term for the process of reviewing the validity of the will and the distribution of the assets. An improperly drafted will can lead to your assets going to someone you did not intend. An experienced estate lawyer can ensure that your assets go to your intended beneficiary when drafting a will.
Wills and trusts are not mutually exclusive. They go well together. You can put assets in a trust so that they’re handled exactly how you want them to be. Then you can have a will to cover what isn’t covered by the trust.
Do I Need a Trust?
It’s a misconception that only the extremely wealthy get trusts. The truth is everyone could benefit from a trust. It gives you better control over how you pass your assets. In the trust agreement, you can add instructions for how and when your heir inherits the assets.
Note that a trust is a legal entity. This means that probate won’t affect the assets and the rules you set for distributing the assets are set in stone.
A trust works very well together with a will. You could opt for only one, but it is certainly better to have both. A usual option combines a pour-over will with a trust.
Under a pour-over will, you can direct that your assets be moved to a trust upon your death, from which you can distribute them as you wish. Some people opt for a testamentary trust — a trust created from instructions from a will. Some create living trusts while alive with instructions from the will to transfer on death.
Pros of a trust
The main advantage is that trusts can avoid the probate process. Doing so provides many benefits as follows:
- Keeps your privacy. Probate puts your will into the public record. By getting a trust, you avoid probate and keep things more private.
- Avoids the hassle. Probate can be an expensive and tedious process especially when people contest your will. A trust lets your surviving beneficiaries get the assets as soon as possible.
- Gives assets to your loved ones. A probate court could give your assets to people other than the intended successor. Avoidance of probate makes sure that your assets are given to whoever you want.
Why do I need a will?
The only people who have no use for a will are those with nothing to pass on after death. Even if you have very little to pass on, a will can still help. Small estates may only need a simple will for a comprehensive estate plan.
Consider a will if you want specific belongings to go to specific people when you die. If people disagree over who gets what, this delays probate and delays the time your beneficiaries get your assets. With a will, you provide legal documentation of your wishes, which could prevent these disagreements.
Pros of a Will
Even a simple will provides multiple benefits:
- Inexpensive. A will is much cheaper than a trust if you want to pass your assets.
- Comprehensive. A trust may not cover everything in your asset, but a will can cover more
- Convenient. A will could make lessen probate costs and let your beneficiaries get their inheritance much easier.
- Protective. A will lets you name a person for guardianship of your underage children.
- Helpful. If the beneficiaries of a life insurance policy die before you, a will helps distribute the proceeds.
Our estate planning attorneys will ensure that everything’s clear when setting up your estate plan. For any concerns, contact us at The Dodds Law Firm and get started on your estate planning today!