One of the most common questions I hear is “Which one should I get: a will or a trust?” There seems to be an attitude of “either, or”, or “ this or that”. And I get it. We don't often hear how both can be used together.
When you think of trusts it is easy to associate the idea with complicated, expensive estate planning and “trust fund” kids; two things the everyday person may not relate to. Wills, on the other hand, are usually thought of as the easier, more commonly used method of the two. Wills are definitely more often portrayed in entertainment media, as the surprising contents of a will can create lots of drama surrounding a character's death.
Let's say you just go with a will. After all, it is cheaper. Before your assets can be distributed at your death, the will must first go through probate in court. The court will have to approve the will and approve who can act to execute the terms of the will. Time gets spent notifying any potential creditors and other interested parties. It can be a lengthy and expensive process, so any money you saved on the front end just doing the will is now far exceeded and paid by your remaining property. Also, probate is a matter of public record.
For these reasons there is a huge advantage to incorporating a trust into your estate plan because property within a trust can avoid the probate court altogether, and be privately distributed according to your wishes. And while it's true that getting an estate plan with a trust costs a little more, it saves more in the long run since you get to bypass going to court to administer your affairs. Now that's just math. The caveat here, however, is that the trust can only control property actually titled in the name of the trust. So, if your house is not properly titled in the trust's name then it likely won't pass to the person you designated but instead be probated and distributed under state law.
To safeguard against this caveat, a smart estate plan will also use a type of will called a “pour-over will” that acts as a failsafe that transfers any property subject to probate into the trust. So for the majority of individuals, a solid estate plan is going to involve both a pour over will and a trust. The trust allows you to plan ahead and keep assets out of the courts after your death. The pour over will acts as a backup plan to limit property exposure to the probate process by directing the property into the trust.
Despite these general suggestions, everyone's situation is different. How do you know what is best for you? Click the calendar link to schedule a free consultation and let's chat.