Life can and often does change in the blink of an eye. Whether you’re planning a wedding of starting your family it’s essential that your Estate Plan change with your life. So, if you’ve recently married, divorced, started a new business, or purchased your dream home, reviewing your Estate Plan today can save your loved one’s time and money tomorrow.
So, Estate planning is not just for the wealthy. Good estate planning is often more impactful for families with modest assets because the loss of time and money as a result of poor estate planning is more detrimental.
A will provides your instructions, but it does not avoid probate and will only direct how your assets are devised. The assets must still go through your state’s probate court before they can be distributed to your intended beneficiaries. The process varies greatly from state to state, but it can become expensive with attorney’s fees, executor commissions, and court costs. It can also take anywhere from a few months to two years or longer. In most cases probate proceedings are open to the public, and your creditors and any excluded heirs are notified of their opportunity to file for payment of a debt or a share of your estate. In short, the court system, not your family, controls the process.
Deciding whether to draft a Trust or a Will is an individual decision and should be made on a case by case basis with an Estate Planning expert. Here are some facts about both Trust and Wills that may help make your decision a bit easier.
Compare and Contrast
Yes, most of my clients with larger estates select a Trust over a Will as part of a complete estate plan. Wills, however, can be an excellent fit for the right client. Some of the reasons include:
Trusts bypass probate. Probating an estate is not as expensive as some people make it out to be. The overall cost varies greatly depending on the jurisdiction, size, claims, and whether challenges are made. Drafting a Trust allows you to select successor trustees, either individuals or corporate to carry out the terms of your Trust.
Trusts are not public. Probate is a public process.
Wills are used to devise an estate.
Trusts also devise an estate; however, Trusts provide the Grantor greater flexibility and control. Trust give the Grantor has the ability to “pull strings” from the grave. This means the Grantor may set terms as to how assets are devised to their beneficiaries. For example, the Grantor may state that 50% of a beneficiary’s inheritance is payable immediately and the remaining 50% is payable after she graduates from college.
Trust are used for Estate tax planning for larger estates.
Size matters – for individuals with smaller estates a simple Will may do the trick. Establishing Transfer of Death Agreements for bank and brokerage accounts allow assets to transfer by operation of law to beneficiaries thus bypassing the probate process.
Cost – the cost of drafting a Trust can be more than twice that of drafting a Will. Though drafting a Trust is more expensive upfront, the added cost of probating a Will could significantly reduce the cost difference.