Writing a will may not be the best course of action for your family. A will does not ensure that the home you worked for your entire life remains in the family nor that your deadbeat son-in-law won’t receive any portion of the assets left to your daughter. Legal documents other than wills, trusts, can provide more protections as you can creatively structure how, to whom, when, under what circumstances, and other criteria to the disbursements of your assets.
A misconception in choosing to create a trust is the limitation placed on the asset(s). There are no limitations set on what can be done to the asset(s) if you are the trustee. Although, all asset(s) (i.e. your home) are transferred out of your name and into the name of the trust, the trustee still maintains power to sell, donate, buy, refinance, gift, or what he/she deems necessary to the asset(s).
A trust has many benefits and there are many types of trust that fall under one of two categories (irrevocable or revocable). A revocable or living trust can be changed, altered, or dissolved by the trustee at any point in time. Unlike wills, living trusts are effective prior to your death. No more worries about that deadbeat son-in-law. A trust can ensure that he does not receive any rights to the assets you leave to your daughter upon your death. Another benefit in creating a trust is eliminating the need to transfer ownership from one individual to another.
Transferring ownership is why the probate court has to be involved in an individual’s assets when he/she has a will. A trust can avoid the probate process saving time and money. If an asset(s) remains in your name upon death, the asset(s) not listed in the trust will have to go through the probate process. An irrevocable trust example is testamentary trust. This trust goes into effect after your passing and is created due to wording within a will. Probate court is not avoided for this type of trust as the will has to be probated before the trust is established. The last benefit of a trust is its potential to assist in avoiding or minimizing inheritance or gift taxes collected from the state and federal governments.
Disadvantages of a trust relate to the upfront cost of preparing this legal document. Some argue that the upfront cost of a trust outweighs the cost of all the combined fees collected during the probate process (attorney, court, and appraisal). Another disadvantage is when a trustor forgets to fully fund the trust (put all of their assets in the name of the trust), which causes the asset(s) to go through probate. If a pour-over will is not written in addition to the trust, that asset(s) is treated as if no will waswritten and the courts determined how to distribute that asset(s) according to the state law. If a pour-over will exists, that asset(s) still goes through probate but the judge has guidance on your last wish for that asset.
There are other alternatives to a trust like joint ownership. Joint ownership does not prevent probate but postpones it. Upon the death of one owner, the full ownership is assumed by the surviving owner. If both owners die at the same time or the surviving owner doesn’t add another joint owner, the asset goes to probate. Prior to death, you could transfer ownership to the desired individual. For bank accounts, create either a payable upon death or transfer on death bank accounts. These types of accounts eliminate the need of a court order through the probate process for your survivors to access your bank accounts.
Estates are categorized as will- or trust-based. The monetary value collected over your lifetime does not dictate whether you should have a will or a trust. Consider the cost of probate in your state, the maturity of your beneficiaries, and if you want certain valuables to remain in your family. Whether you choose a will or trust, choose something. Do not because part of the statistics. According to a survey conducted by AARP about 60% of American do not have any documentation detailing how to handle their financial asset(s).