People often ask me if they need a Will or a Trust. This is a good question, and, ultimately, arriving at the answer depends on what you are trying to accomplish. Your reasons and objectives for your estate plan go a long way toward making the determination regarding which tool to use.
Having your estate plan in your head is not useful if you are no longer here. Getting your plan on paper is the only way to successfully pass this information along. In doing so, you want to make sure that you are in compliance with all local laws and rules for making valid documents. Whatever strategy you pursue, whether a Will or a Trust, your estate plan allows you to:
Distribute your assets to named beneficiaries
Create provisions to protect assets for minor beneficiaries
Communicate burial, cremation, or other special instructions
Appoint a trustworthy person to manage your estate
Nominate a guardian for your minor children
Make changes as your life changes, so long as you are living and have capacity
A Will is the most basic form of estate planning and is a document in which you provide instructions for how you want your affairs handled upon your death. In a Will, you appoint someone trustworthy and responsible to carry out your wishes as you have written them, and notably, you also nominate a guardian for any minor children.
As with a Will, a Revocable Living Trust (shortened to simply "Trust" here) also allows you to state your directives about the administration and distribution of your assets. The difference is that when you create a Trust, you are creating an entity (I like to think of it like a business) in which to transfer your assets. This entity lasts beyond your death and is thereafter administered pursuant to the instructions contained in your Trust.
Ease and Cost of Preparation. In general, Wills are more basic and easier to prepare than Trusts (though some can be quite complex depending on the circumstances), which keeps time and cost down significantly. From start to finish, a Will can generally be completed in a week or two and the cost of preparing a Will is about 1/3 the cost of preparing a Trust.
Ease of Management. Wills are easier than Trusts to manage during your lifetime, as they do not require any necessary legal action until after death. While you should be sure to review your Will on a regular basis (every 3-5 years) and make any necessary changes, it does not require the lifetime management responsibilities of a Trust. It can easily and safely be stored for use when needed.
A Will is not a lesser estate planning method than a Trust. The majority of my clients – roughly 75-80% – are best served and satisfied with a Will.
Avoiding Probate. Unlike a Will, which must go through probate – the court process for administering an estate – a Trust avoids probate and the time, cost, and hassle of the court system.
Maintaining Privacy. Distinct from a Will, which becomes public record after you die, a Trust is kept private and your personal information is shared only as necessary – with beneficiaries (limited only to information concerning them), creditors and professional service providers (attorney, CPA) – rather than the world at large.
Estate Tax. In Oregon, Trusts can be especially useful to married couples who have larger estates (over $1 million) to eliminate or mitigate estate tax by allowing for restructuring of assets upon the death of a partner.
Asset Management. Because Trusts last beyond your death, you can structure a Trust to last for many years thereafter (subject to legal limits) to benefit your beneficiaries. This can be especially useful in situations with minor beneficiaries, adult beneficiaries who are unable to manage money (special needs, drug problems, creditor problems, etc.) and where there are issues between a "later-in-life" spouse and children who were born of a previous relationship.
Contrary to popular belief, Trusts are not just for wealthy people! While Trusts do offer clear advantages for larger estates, mid-sized and modest estates can absolutely benefit from creating a Trust with the appropriate legal guidance.
I have highlighted a few of the advantages of both Wills and Trusts, but there are many more complexities to both estate planning techniques. I cannot stress enough the importance of working with a competent estate planning attorney to fully achieve your estate planning goals. In working with an attorney who can guide you through nuances in the laws in the state where you reside, you can determine what strategy works best for you and your family, and rest assured that you're getting the best protection.
Finally, it's helpful to note that as long as you are living and have capacity, your estate plan can be changed or replaced during your lifetime, giving you complete discretion to edit your documents as your life evolves and your circumstances change. The best thing to do (at any age) with respect to estate planning is simply to begin. Whatever estate plan you and your attorney put together will provide peace of mind for you and your loved ones during your lifetime and beyond.
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