ESTATE PLANNING 101 – WILLS vs TRUSTS
Your estate plan should accomplish some extremely important things, including protecting you, your assets, and your loved ones both now and in the future. Given everything your plan can, and should, do for you and your loved ones, you may not know where to start to ensure that your finished plan works as intended.
If you die without an estate plan, your estate will be subject to intestacy laws in your state and likely have to go through the process of probate in court. The division and distribution of your estate will be subject to a predetermined formula. For many, the state’s distribution plan is vastly different from how they would have chosen to distribute their assets themselves. The following explanations provide a basic understanding of the difference between planning with a will versus a trust.
Planning with a Will. A will is one of the most basic and commonly used estate planning tools. Simply put, a will is a legal document that directs how your assets should be distributed when you pass away. It also nominates who should serve as the guardian of your children. A will is only effective at death. Upon passing away, a personal representative (also known as an executor), that is named in your will, manages the distribution of the estate to any beneficiaries named, however, the distribution of the assets is overseen by the probate court.
A probate is necessary when a person dies, who owned assets that were in the decedent’s name only, with no pay-on-death or transfer-on-death beneficiary listed. In this situation, a probate court is the entity that grants authority to someone living, the ability to access, manage and distribute the assets of the deceased person.
Another consideration when planning with a will is that a will does not provide any lifetime planning, an increasingly important consideration now that Americans are living longer. Who will help make financial and medical decisions if you become incapacitated are important decisions to have in place before they are needed. Of course, passing away with just a will expressing one’s final wishes is much better than dying with no plan at all.
Planning with a Revocable Living Trust. One of the most comprehensive estate plans is the revocable living trust. A trust is often a better way to give your family faster, unfettered access to the funds they need. A living trust is set up in such a way that the trust owns the assets to be left to the beneficiaries, thereby avoiding the need for probate.
Upon the death of the original trustee or co-trustees, the successor trustee becomes responsible for the management and distribution of the trust assets. Like the personal representative of a will, he or she is required to manage and distribute the estate strictly according to the terms of the trust.
A trust can provide asset protection for surviving spouses and children, and other named beneficiaries, so that the assets that you spent a lifetime accumulating are not squandered in a lawsuit or part of a divorce.
A trust also provides for administration during incapacity, so that successor trustees can have access and authority over the trust assets quickly and avoid the need and cost to go to court.
At Morris Hall, our only focus is on estate planning and we are passionate about helping families and individuals accomplish their estate planning goals to ensure that hard earned assets are passed to the intended beneficiaries with the least delay possible. Get started today by contacting Morris Hall and scheduling a complimentary consultation to review or begin your estate plan.