Wills vs Trusts
Frequently Asked Questions
What are the disadvantages of only having a will in your estate plan?
A will sets forth ones legal plan for the disposition of his or her property at death, but are you aware of your wills limitations? After reading the points below you may find it beneficial to incorporate a trust into your estate plan. The five most common disadvantages of only having a will are as follows:
- Timing of document provisions -While provisions of a will go into effect only upon death, trust provisions go into effect immediately after the creation of the trust, therefore, your estate plan starts working sooner rather than later.
- Incapacitation - Instructions documented in a trust go into effect if you become incapacitated. Someone who suffers incapacity with only a will must be appointed a guardianship through the court system. This can be very costly and time consuming for the people involved.
- Probate - If you pass away with only a will your assets must pass through court proceedings known as probate. This can be time consuming and costly for the heirs inheriting the assets. The net result is that your heirs will receive less of an inheritance due to additional court, and legal fees that will need to be paid.
Assets held in trust avoid probate completely and may save your heirs a substantial amount of money when you pass. The larger your estate the higher the probate fee.
- Privacy - Having a trust prevents your family's estate from becoming public record. If you die with only a will anyone can look up your family's estate through public probate records. To fully protect your family's privacy a trust is required.
- Transferring assets to children under the age of 18 - A parent that passes with only a will, and whom has young children under the age of 18, may find it objectionable to learn that their children's inheritance must be managed by a court-appointed guardian. With a trust in place an independent trustee of the parent's choosing can act as a fiduciary for the children if the parent was to suddenly, and unexpectedly pass away. A trust will allow the independent trustee to make investments and distribute income and principal to the children without approval of the courts. Bypassing the court system can save a significant amount of time and money.
Conclusion: As you can see there are a few key differences between wills and trusts. To maximize flexibility of your estate plan we strongly encourage you to have both.