As an estate planning attorney, I’m often asked, “How do I know if I need a trust as opposed to a will?” Many people assume that Trusts are just for the wealthy, but the benefits that they offer to the average person are significant. Here are a few factors to consider when deciding between a Will and a Revocable Trust.
Wills vs. Trusts – Planning for Mental Disability
Regardless of your net worth, and particularly if any of your assets are titled in your sole name, a Trust may be useful for mental disability planning. Please note that not all Trusts are created equally. A well drafted Trust should contain provisions for determining your mental capabilities outside of a court proceeding as well as provisions to take care of you and your finances if you do become mentally incapacitated.
Wills vs. Trusts – Estate Planning for Minor Beneficiaries
Young parents’ largest assets are either a life insurance policy or a retirement plan. This becomes a problem if the parents later divorce or if one parent dies and the children are still minors when the second parent dies. What will happen to the life insurance or retirement account? In these cases, the funds will be placed in a court-supervised guardianship or conservatorship for
the benefit of the minor until age 18 or 21. I recommend that the parents establish a Trust to be the owner and primary or contingent beneficiary of the life insurance or retirement account. The successor Trustee will have the legal authority to accept the funds instead of a court-supervised guardian.
Wills vs. Trusts – Estate Planning for Singles
Anyone who is single and has assets titled in their sole name should consider a Trust. The two main reasons are to keep you or your assets out of a court-supervised guardianship and to allow your beneficiaries to avoid the costs and hassles of probate. The minimum net worth necessary for a single person to consider using a Trust varies from state to state. In Florida, estates valued at $75,000 or less are considered small enough to be administered through a simple probate procedure. If the value of your assets is over the minimum threshold, a formal, time-consuming and costly probate administration will be required.
Wills vs. Trusts – Estate Planning for Couples in Second or Later Marriages
If you are in a second or later marriage and you and your spouse have different beneficiaries (such as your own children or grandchildren) then you should both consider establishing Trusts to insure that each spouse’s estate will go to whom he or she wants it to go, outside of the probate process.
Wills vs. Trusts – Keeping Your Estate Plan Private
A last will and testament that is filed with the probate court becomes a public court record that anyone can read. A Trust is a private contract between you as the Trustmaker and the Trustee. Unless your beneficiaries have to go to court over something written in your Trust agreement, the document should remain a private document that only the trustees and beneficiaries will be able to read after your incapacity or death.
Wills vs. Trusts – Special Needs / Government Benefits
These Trusts are created to ensure that beneficiaries who are disabled or mentally ill can enjoy the use of property which is intended to be held for their benefit while avoiding the beneficiaries’ losing access to essential government benefits.
Wills vs. Trusts – Estate Planning for Real Estate Located Outside of Your State
If you own real estate in more than one state or outside of your home state, you will need to establish a Trust and deed the out of state property into the Trust. Otherwise, your family may be faced with two separate probate estates – one in the state where you live, and a second in the state where your real estate is located.
You can often have multiple benefits by utilizing a Trust as opposed to a Will. Of course, if you find yourself in need of a Trust, be sure to fund your assets into your trust and update your beneficiary designations.
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