Do I need a will or a trust? That’s the most basic question to begin creating an estate plan. And, let’s face it, you really do want a say in who gets what after your gone. That’s just human nature. Without some kind of legal instructions, you can’t guarantee that your wishes will be carried out. So, is a will or trust the best document for you?
A will is the most basic form of estate planning. It names an executor—the person who will carry out your wishes. It lists the people you want to receive some part of what you leave behind. A will also goes through probate. Your executor has to inventory your estate, give creditors an opportunity to claim what you owe them, give your property away as directed by the will, file a final tax return, and then pay any taxes due to the federal government, the state where you lived at the time of your death, and possibly the county where you lived. Some people don’t like a will because the probate process is public. Your will is filed at the courthouse and anyone can look at your will and see where your stuff went.
A trust, on the other hand, is a private document. It doesn’t get filed with the court and your estate does not go through probate, meaning it is not open to public scrutiny. You name a trustee, which is the person who carries out the instructions in your trust. While you’re alive, you manage the trust and make the decisions, but you don’t own your property any longer. Everything is transferred to the trust and the trust owns it all, which takes a little getting used to for some folks.
So, which do you use?
Wills are helpful if you live in a state with a simple process for uncontested wills. Even if your executor has to probate your estate, it may be cheaper than a trust if your state has low-cost ways to probate modest estates. And keep in mind, any account where you’ve listed specific beneficiaries is not part of your estate and does not go through probate—IRAs, 401ks, insurance policies, annuities, joint accounts with right of survivorship, and transfer-on-death or pay-on-death accounts. If those accounts make up the bulk of your estate then a will may be the best vehicle for you.
No matter the size of your estate, a trust may be most appropriate if probate is expensive in the state you live in—for example, if lawyers charge a percentage of the estate’s assets rather than a flat or hourly fee. Other reasons to have a trust may be if you own property in more than one state, or if you have assets that need ongoing management.
Will or trust, you can name people to handle your affairs if you can’t. If you have a will, you grant power of attorney to the person you want to make decisions. With a trust, the trustee you named will act on your behalf.
Answering the question “Will or Trust” requires good advice and honorable intentions. Whoever you consult, make sure they have your best interest in mind and are not pushing you into a trust because they make more money. You probably want to get a second opinion so you’re comfortable you’ve made the best choice for your situation. But to be sure that your wishes are carried out the way you want after your expiration date—do something!