Five Reasons a Living Trust is Better than a Will
When most people think of estate planning, they think of wills.
A will sets out who you are, who will be in charge of settling your estate when you pass away, and how you want your assets distributed. It also establishes a guardian for minor children, if any.
Seems like it covers all the bases, so what’s the problem?
While a will seems good in theory, in practice, problems can arise -- especially if you have children with special needs. Here are five reasons to add a revocable “living” trust to your estate plan.
- The Probate Process: Hollywood would have you believe that probate is as easy as a lawyer sitting behind a big desk to read the will to the heirs the day after the funeral. In reality, the probate process can take several months to several years depending on the size and complexity of the estate and the schedule of the probate court. During probate, the court assesses the deceased’s assets, prioritizes final payments to creditors, resolves disputes, and identifies and distributes remaining assets to heirs and beneficiaries. Unlike a will, a trust can be executed immediately.
- Disputes: One of the main causes of a lengthy probate process is family dispute over the will. Disputes arise for many reasons. Your children may object if you want to leave your assets to your new spouse. Or one child may feel entitled to a larger share of the inheritance for any number of reasons. An heir may contest the will if they believe you were unduly influenced or mentally incapacitated at the time the will was written. Since a trust is not subject to probate, it is also harder to dispute.
- Privacy: Probate is a public process meaning that anyone who could have a claim to your estate can petition the court for that right -- even estranged family members. By contrast, trusts are private, allowing you to maintain more direct control over who receives what.
- Minor or Special Needs Children: Distribution of assets is the last step of the probate process, which, as mentioned before, may take several months to several years. A will should designate a guardian for minor children, or children with special needs. Although the court may award the guardian an allowance to care for the children during the probate process, it may not be enough to adequately care for the children. Funds from a living trust, however, can be available immediately.
- Cost: Probate fees can include court costs, bond fees, appraisal fees and executor’s fees. The longer the process, the higher the cost. Grieving heirs may also want to hire a probate attorney to walk them through the lengthy and confusing process. All these fees are paid by the decedent’s estate, reducing the overall inheritance. The overall cost of settling a trust is often lower than the cost of settling an estate through the probate process.
A “living” trust is a powerful estate planning tool that offers all the benefits of a will (and more) without many of the drawbacks. Like a will, revocable living trusts allow you to maintain control of your property. They also allow for flexibility. You can add assets, such as a home and stock, to the trust while still living in the home and buying or selling stock or other property. You can change the terms of the trust at any point during your life, as long as you have capacity. Once you die, the trust becomes irrevocable, or unchangeable, ensuring that your wishes are fulfilled.
A trusted estate planning attorney can help you write a revocable living trust that meets the needs of your particular situation and eliminates the uncertainty of a will on its own.