It’s not uncommon for our clients to ask us to explain the difference between a will and a trust and to advise them as to which is best for them. Choosing the right instrument to determine who gets your assets after you die and who cares for your underage kids or children with disabilities is important. The first place to start is understanding how the two instruments work.
Will and its Advantages and Disadvantages
If you are looking for a court-supervised procedure, the will is the perfect choice. A will is a document that directs who will receive your property at your death, and it appoints a legal representative to carry out your wishes. A will goes through probate meaning a court oversees the administration of the will and ensures the will is valid and the property gets distributed the way the deceased wanted. This means, however, that this matter will be public record. Depending on the estate, this can be a lengthy process. Also the probate process can be expensive, especially if there is a dispute regarding who is entitled to what.
The greatest advantage of a will is that it allows you to name a guardian for your children and to specify your funeral arrangements, which a trust does not. If the sole parent of a minor child dies without a will, the local court will decide who is given guardianship of the child. This may be a family member, or could be a foster home. On the other hand, a will allows parents to choose their child’s guardian.
Trust and its Advantages and Disadvantages
A trust can be used to distribute property before death or afterwards. This is a legal arrangement where a trustee, for example a bank or law firm), holds legal title to property for another person, called a beneficiary.
A trust covers only property that has been transferred to the trust. In order for property to be included in a trust, you must first put the property in the name of the trust. The greatest advantage of a trust is that unlike a will, a trust is not filed with the probate court when the client dies. Therefore, the details of the client’s estate plan do not become a part of the public record. Since a trust can be created before death, a trust can also be used to plan for disability or to provide savings on taxes.
The greatest disadvantage is that it is expensive to maintain a trust. A bank trustee or law firm trustee will charge fees to maintain your trust. Further, 401(k)s, IRAs, 401(k)s, IRAs and some other retirement accounts cannot be placed in a trust. Also unless its a joint trust, some jointly-owned property cannot be held in a trust. For example, spouses may create joint living trusts, with both husband and wife acting as grantors and trustees holding both jointly and individually-owned assets in their trust.
Final Thoughts
Wills and trusts are useful estate planning devices which serve different purposes. If you want you can choose one or both. Both will and trust can work together to create a complete estate plan. It is important, however, you start early, plan, prepare, and contact an estate planning attorney to create these essential end of life documents.
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The above is provided for informational purposes only and is not intended to serve as legal advice. Seek legal advice only from an attorney. For legal advice on the setting up your advance directive, contact Atty. Syeda M. Madani to set up an appointment. If you have a few questions that can be wrapped up in 30 minutes or less, try our 30-Minute Quick Call Appointment.
