When it comes to estate planning, there are many options available to individuals. One of the most common is deciding between a will and a trust. Both have their advantages and disadvantages, and it is important to understand the differences between them before making a decision. For small properties with easily transferred assets and simple legacies, a will may be the most economical and efficient option.
Wills are usually cheaper and easier to create than trusts. If you have a smaller estate, the costs of creating the trust may exceed the savings of avoiding probate. Plus, you don't have to worry about renaming them or the other formalities that come with holding your assets in a trust. Finally, if you are skeptical that your assets will be distributed according to your wishes, the use of a will requires judicial oversight of your estate.
Is a Will More Likely to Be Challenged Than a Trust? Trusts are rarely questioned, partly because their details are not public. In addition, the rules for contesting wills are well established, while there are fewer laws relating to challenges to trusts. Wills, on the other hand, are generally easier to create and cost less to carry out. Therefore, they cost less upfront than a trust.
However, once again, the final cost of a will depends on how simple or complicated it is. If estate taxes and probate are a concern for you, you should turn to a trust for your assets and properties. While a trust won't eliminate taxes altogether, it can help reduce liability for what your beneficiaries will owe. Trust also helps your loved ones avoid legalization.
Therefore, property that passes through a living trust does not go through an estate, which can save your loved ones time and money. Many people make living trusts specifically to avoid probate. On the downside, living trusts are generally more complicated and costly to establish and maintain. You can't use your living trust to name an executor or appoint guardians for young children, so even if you have a living trust, you still need a will to do those things.
In fact, most people who make a living trust also have a will. If a grantor transfers assets to an irrevocable trust for the benefit of third parties or purposes and has relinquished all control, rights and benefits with respect to assets and jurisdictions, courts generally consider the assets to be beyond the reach of the grantor's creditors. If your estate is mixed up in probate court because a loved one is contesting the will, it could mean that the family has to spend the next year going to court while they are grieving. If you leave a will instead of a revocable living trust, your loved ones will have to ask the court to appoint a guardian or conservator to manage their affairs. Tax law provides special benefits for certain irrevocable trusts that benefit charities and, at the same time, provide some economic return to their grantor or beneficiaries. These fiduciary transfers allow grantors to maintain privacy with respect to the nature and value of their assets. Several states adopted versions of the Uniform Code of Succession, which was intended to simplify succession, making it less costly and time-consuming.
Your decision to use a will or trust, or both, should depend on the nature and value of your assets, the seniority and capabilities of your heirs, tax planning considerations, and the complexity of your legacies. However, since the grantor retains control of the trust while it is alive, the assets are included in the grantor's taxable estate. If the cost of establishing and maintaining a trust is reasonable relative to your assets and objectives, a trust can generally liquidate your estate faster than a will and can provide confidentiality for trust assets. If the trust is a revocable trust that you control and you are entitled to receive (or direct) any financial returns, the trust assets will be included in your taxable estate. A charitable remnant trust is an irrevocable trust that provides current income to the grantor or other designated non-charitable beneficiaries and a partial tax deduction based on the valuation of the assets contributed. But if you want to be sure that your choices are legally binding and can stand up to scrutiny if they are contested, you should talk to a probate lawyer. Therefore, making a will that names your executor, determines who will receive your assets and express your intentions about guardianships, charitable contributions, funerals and burials should not be a late decision in life. A revocable trust has several distinct advantages over both wills and wills alone but making a decision between these two estate planning tools comes down to personal concerns as well as what you want to achieve with your assets.