Do you have a will? If so, we commend you. Having a last will and testament in place will help ensure your wishes regarding the conveyance of your assets after your death are carried out.
But is a will enough? Should you be considering other methods of holding and conveying property such as a trust? To answer that question, you’ll need to understand some of the basic differences between a will and a trust.
A will is a document you create to be executed upon your death. As such it requires a process to do that, commonly known as the probate process. Each state manages the process somewhat differently, but certain key elements are universal. Probate is overseen by the state’s court system, specifically a probate division, and is administered by an executor who is appointed by the court, typically someone named by the deceased individual. The process of probating a will takes time – from months to even years, depending on the complexity of the estate, asset determination, and amicability of the beneficiaries.
By contrast, a trust is a way to hold or own your assets in a legal vehicle during your lifetime that also serves as the mechanism to disperse those assets after your death rather than going through the state’s probate process. Trusts can be revocable or irrevocable. In a revocable trust, the same individual/owner can act as the grantor (the individual who creates the trust), the trustee (the individual who manages the trust), and the beneficiary (the individual who benefits from the trust). To avoid probate, assets are transferred to the trust which then becomes the legal “owner.”
For many of our clients, creating a trust makes the most sense to ensure assets are appropriately managed during their lifetime and disbursed upon their death without the necessity of involving the courts. In this way, individuals place less stress on their beneficiaries and the court system, while expediting the inheritance process. What might take years through probate hopefully be managed in a much shorter period of time.
Even with a trust in place, it still makes sense to have a will in place to address any assets that may not be held in a trust. Specifically, a ”pour-over” will can ensure any assets not included in the trust will be added to the trust after the grantor’s death (but only after going through probate).
While avoiding probate can be accomplished through a revocable, or “living” trust, there are other circumstances when an irrevocable trust better meets an individual’s needs. An irrevocable trust has one key difference – control of the assets and terms of the trust are typically vested in someone other than the grantor.
For many individuals, establishing a trust as the primary method of transferring assets after their death makes sense. However, trusts are a complex legal area. To determine how a trust might best fit into your estate plan and what type of trust you should use, consulting with a knowledgeable attorney in estate law is a good place to start. Contact us.