If I have a will, why would I need a trust?
Do you have minor or young adult children? Are you concerned about who would manage your finances for you if you were to become disabled or incapacitated? Do you want to make the probate process easier for your loved ones? If so, the information below will be helpful in deciding if you should consider incorporating a trust into your estate plan in addition to having a will.
Trusts and wills have the same essential function: passing your property to your heirs after your death. However, a trust offers some advantages that a will alone does not have.
First, everything left in a will has to pass through probate. Probate is the legal proceeding where a court transfers ownership of your assets to the people designated in your will. For example, the probate court would supervise the sale of your home and the distribution of the proceeds in accordance with the will’s named beneficiaries. There can be significant costs and delays associated with probate, and if you die and your heirs need access to money immediately, probate will make that more difficult.
A trust has the advantage of allowing your assets to be managed by a trustee of your choosing outside of probate and without requiring court proceedings. This means that your trustee and the beneficiary can access the assets held in trust immediately. In addition to being more efficient, trusts also offer additional privacy. Probate proceedings for a will are public record, meaning that anyone can read the terms of your will or the circumstances of its administration. But because a trust is managed outside of probate the nature and amount of your property and the identity of the beneficiaries of the trust will remain private.
A trust is an essential planning tool for parents with minor children. With a will, if a minor is a beneficiary, the probate court must name a conservator to manage the assets until the minor reaches 18. In addition, the probate court supervises all distributions of money for that minor and it can be a frustratingly inconvenient process when a guardian is trying to manage the care of a child who has recently lost a parent and has to navigate the court system and a conservatorship. The court can also exercise its judgment to disallow any expenditure. But with a trust, you can appoint a trustee who will be empowered to make all spending decisions for minors according to your wishes, and you can specify the age at which a given beneficiary can take control of his or her inheritance, instead of that minor child receiving a lump sum of the entire inheritance upon turning 18. A trust can also provide creditor protection to safeguard their inheritance.
In addition to being efficient and affording privacy, a trust can also benefit you while you are living. By naming a trustee, if you were to become disabled or incapacitated for any period of time and unable to make financial decisions for yourself, a trust may be used to manage your assets without having to go through a lengthy conservatorship process with the court. It puts you in the driver seat of deciding who will help make decisions on your behalf if you are unable to, instead of a court making those choices for you.
To establish a trust, you first create it and then designate your various assets (retirement accounts, bank accounts, homes, cars, life insurance, etc.) to be transferred to the trust upon your death. Alternatively, you could transfer assets to the trust while you are living, to facilitate managing the assets in case you were to become disabled or incapacitated. Either way, after your death, the trustee you’ve chosen will gather your assets and distribute them (or the proceeds of their sale) to the beneficiaries named in your trust according to your terms set out in the trust. There is no waiting period involved in trust administration, which means that your beneficiaries have much faster access to the funds you’ve left them.
A trust, when properly created and funded, is usually an easier, faster, and less expensive way to pass your assets to your beneficiaries, which is especially true if minor children are involved.
