Although a complete estate plan can sometimes consist of many different documents, almost every estate plan will include either a Will, a Trust, or both. When I meet with clients to discuss their estate planning needs, they usually have one or both of the following goals in mind: 1) provide guardianship for their minor children in the event of their own premature death, and 2) put a plan in place to distribute their assets upon their death. With proper planning, these goals can be accomplished with a Will or a Trust.
By definition, a Will is a document through which a person provides instructions for the management of his or her estate after his or her death. Through a properly drafted Will, a person can provide instructions for final burial, for guardianship of a minor child, and for distribution of property.
A Trust is defined as a fiduciary relationship in which one party, known as the Trustor (the person creating the Trust), gives another party, the Trustee, the right to hold legal title to property or other assets for the benefit of a third party, the Beneficiary. There are two general types of Trusts - a Living Trust, and a Testamentary Trust. A Living Trust is effective during the Trustor's lifetime, whereas a Testamentary Trust is effective only upon the Trustor's death.
To properly determine whether a Will or a Trust is an appropriate estate planning document, it is important to understand the advantages of each.
The advantages of a Will are:
1) A Will is typically less expensive than a Trust.
2) A Will can be used to appoint a guardian for a minor child, whereas a Trust cannot. For that reason, if a Trust is necessary, the clients' estate plan will also usually include a simple Will, also called a "Pour-Over Will." This is another reason a Will is less expensive than a Trust.
The advantages of a Trust are:
1) A Trust can be used to avoid Probate. Probate is the process of taking the decedent's Will into Probate Court and seeking court approval to carry out the wishes that are expressed in the Will. Depending on the size and complexity of one's estate, the probate process can be expensive and time-consuming. A Trust, on the other hand, does not require court involvement upon the death of the Trustor.
2) A Trust can be used to control the Trustor's assets beyond his or her death. Since a Trust can "own" property, a Trust can exist beyond the Trustor's death, whereas a Will ceases to exist once the probate process is completed and the decedent's assets are distributed. So, a family cottage or other asset can be preserved for use by future generations through a Trust.
3) A Trust can be used to control when beneficiaries receive their inheritance. If parents want their children to receive their inheritance at age 25, for example, instead of at age 18, a Trust must be used. By law, beneficiaries are entitled to their inheritance through a Will at age 18.
4) A Trust is not public record, whereas a Will becomes public record once it is filed in Probate Court.
5) A Trust can be used to limit inheritance, or death, taxes.
Before deciding whether to use a Will or a Trust as part of your estate plan, it is important to determine your goals, and then to choose the estate planning document that will best help you achieve those goals. To learn more about this topic, or to schedule an appointment, please visit my website at http://www.toburenlaw.com/.
