Many people have questions about the difference between a will and a trust, and when a trust may be necessary.
The Basic Facts About Wills
Very simply, a will states the wishes of a person upon their passing about how to distribute their property to heirs. The will also names an executor who oversees the process of distributing assets, as well as nominates a guardian to care for minor children. A will is only in effect after someone passes.
If a person’s assets are over $166,250 or there is real property involved when they pass, the Probate Court will be involved. Probate is rather lengthy, on average 24 months, and expensive: probate fees for a conservative estate of $500,000 are over $26,000.
How a Trust is Different From a Will
A properly funded living trust should avoid any court involvement when someone passes. A living trust is a more flexible “will substitute” which not only provides for asset distribution upon passing, but also includes instructions if someone cannot make financial decisions for themselves.
A trust is not only for the wealthy, but for anyone who wants their heirs to avoid court involvement and high fees, as well as anyone leaving assets to a minor child.
When a trust is established, assets are held by you as trustee of your trust. Your assets are then managed according to your instructions during your lifetime and upon passing. Most trusts can be amended or revoked during your lifetime. A trust based estate plan offers a lot of flexibility and is widely used.
If I Already Have a Will, Why Would I Need a Trust?
Wills go through probate court when real property is involved or assets exceed $166,250. Even if you have will, your current circumstances may require different estate planning strategies that can be accomplished with a trust.
In addition to the above, a trust can assist with:
- The care of minor children, with ongoing support amounts paid from the trust
- To care for individuals with special needs, without disrupting government benefits
- Real estate holdings can be managed and do not have to be sold during unfavorable market conditions