Having a plan makes any life decision easier. Knowing what to do is made simpler if we know what terms mean. In Super Easy Ways to Understand Basic Estate Planning Terms, we covered five of the most basic definitions of estate planning. Included in those definitions were the terms will and trust. Let’s dig into those a little more. “To will or to trust, that is the question.”
Generally, estate planning takes off in one of two courses. There is the will course. And there is the trust course. Briefly, a will is a document that is created now, takes effect only when the creator passes away, and it ultimately distributes your possessions at the time of your passing. On the other hand, a trust is a document that is created now, goes into effect now, and it ultimately distributes your possessions as a will would, BUT that distribution can happen at different times, and not just at your death.
So, how do you decide between the will or the trust course? There are a number of considerations to take into account. Each consideration should be weighed according to a value you place on it.
Jeppesen Law, PLLC places its emphasis on families with young children. So, that is generally where we would start the discussion. If you have young children, they tend to need the protection of a trust. But, if you are passing your possession on to older, more experienced beneficiaries, then a will is a good option.
Do you want to manage how your possessions are deployed after you pass away? Some great examples are provisions encouraging and rewarding beneficiaries for post-secondary education, philanthropic work, or for caring for other people, such as being a stay at home parent. Maybe you are just unnerved by the idea that if you pass away with a minor child, that child will get everything, at the age of 21 and not know how to handle it. If this is a concern of yours, a trust is a great option to consider as it provides great flexibility in distributing your assets throughout the beneficiaries' lifetime.
Privacy - If privacy is a concern, you should know that “where there is a will, there is probate.” We also talked about probate in Super Easy Ways to Understand Basic Estate Planning Terms, as being an open to the public, court process. That means all the information filed with the probate court is available to the anyone who might be curious. Generally, if a trust is done properly and properly maintained throughout the years, you will avoid probate and its public nature.
Cost - This is generally a consideration people take into account. A will costs less upfront. This is true because a will is more simple to create than a trust, but ends up costing more in the long run. The benefit of a trust is that it is a one-time fee, while a will costs you at the beginning and the end during the probate process. If you are a married couple, the total cost of a will and the probate process will more than double the cost of a trust. (See Jeppesen Law's Pricing Schedule).
Organization of your possessions - A will does not organize your belongings. This is an unfortunate aspect of will based plans. Generally, the person charged in the will to have responsibility over organizing your possessions is a family member. This can be difficult if this person is not the surviving spouse, or it can be difficult if the surviving spouse did not participate in the family’s financial planning. A properly formed trust holds these possessions during your life, so there is no need to “find” them after you pass.
Three other areas worth consideration:
Access to assets - With a trust, generally you have immediate and continuous access to assets. This is true for you during your life and for your named beneficiaries after you pass. However, any possessions distributed through a will technically need to begin the probate process by petitioning the probate court for permission to sell or use any of the assets.
Incapacitation - Trusts are set up to proceed in case of your incapacitation. A will does not have this ability as it is only controlling at your death. A durable power of attorney has a limited time period of coverage for incapacitation. But, any prolonged duration generally requires filing a guardianship proceeding in court.
Challenges - Trusts generally avoid these problems as trusts are private, making it difficult for challenges to be filed. A will and the probate process are public, so anyone claiming an interest may challenge the will.
There you have it, an absolute beginner’s guide to answering whether a will or a trust is the right choice for you. These are not all the considerations that one might possibly ponder, nor are these very detailed overviews of each consideration. They are just meant to get an absolute beginner to start thinking about these considerations.