Amanda Zaluckyj - Thursday February 2, 2023
By Janet Horvath and Amanda Zaluckyj
When estate planning and deciding how you will distribute assets amongst heirs, there are two main avenues: wills and trusts. Robust estate planning typically uses both wills and trusts to protect assets, settle affairs, ensure that any dependents are taken care of, and make certain that assets are distributed to heirs according to the grantor’s wishes.
We’re going to define both wills and trusts, compare them, and touch on how they’re used together.
A will directs the distribution of your assets after your death to heirs and beneficiaries. It also includes details such as who will become the personal representative of your estate and who will become the guardian for any dependents. A will could even direct the personal representative to create a trust to maintain assets for a designated heir, such as a child, until a specified age.
For a will to be valid, it must be signed and witnessed according to state law. Upon your death, it is filed with the probate court in the proper jurisdiction and carried out by your personal representative. In probate, the court will appoint a personal representative to marshal your assets, settle your debts, and distribute your assets according to your will. The probate process may be different depending on the size of your estate and whether the will allows for unsupervised administration.
A trust is a fiduciary relationship in which one party, the trustor or grantor, gives the second party, the trustee, the right to hold assets/property for a third party, called the beneficiary. When the trustor dies, the trustee ensures that the assets are distributed according to the trustor’s wishes as directed in the trust document. The trust document can also establish how the assets and money are used while the trustor is alive. Not only does a trust outline the trustor’s wishes, but it can also provide legal protection for the trustor’s assets; trust assets can avoid taxes and probate and protect assets from creditors.
Various kinds of trusts serve different purposes, including revocable, irrevocable, living and, testamentary trusts. You can read more about these types at our blog.
Essentially, both wills and trusts serve to distribute the grantor’s estate to their heirs. But there are a few key differences:
Unfortunately, there is no one-size-fits-all formula for estate planning. Each individual’s estate, inheritance preferences, and state law create unique circumstances that require “custom” estate plans.
A trust is worth considering if you have a more complex estate, such as assets in multiple states (so each asset is subject to that state’s probate tax). Or suppose you want to control the timing of the distribution of assets post-mortem, keep your estate private, or avoid probate court and its accompanying fees. In those cases, a trust may also be a good fit for you.
But remember, even if you have a trust, you still need a will to address those items that a trust cannot, such as guardianship of children should you die.
It’s always advisable to speak to a qualified attorney about your specific estate planning needs.
Give the lawyers at Athora a call for all your estate planning needs.
