When most people think of estate planning, most think about drafting wills. Although wills are certainly an important part of estate planning, sometimes they are not enough to accomplish an individual’s goals. Sometimes, in addition to a will, it is necessary to set up a trust. Trusts may be set up while the individual is still alive or may be created by a will. Although they are not a complete substitute for a will, a trust offers many benefits not found in a will.
One of the big advantages of trusts is that they allow property subject to the trust to skip the probate process. During this process, the court determines whether the will is valid, identifies the individual’s heirs, ensures that the estate’s debts are paid, and distributes the estate’s assets according to the terms of the will (or according to the law, if the individual died without a will). Unfortunately, this necessary process can be expensive and lengthy. Since the estate foots the bill for the costs of probate, it can significantly decrease the value of the estate, especially if there are complications. Unlike a will, property in a trust skips this process entirely and is distributed according to the provisions of the trust immediately upon the individual’s death.
Another helpful advantage of trusts is that they are much more flexible with regard to distribution of property than a will, as they allow individuals control over when their heirs receive their assets as well as how the assets are to be used. For example, individuals can specify that their children do not receive their inheritances until a certain age or until certain conditions have been met (e.g. finishing college). Additionally, individuals can specify how their heirs may use their assets (e.g. for educational purposes). Wills, on the other hand, do not offer this level of control.
Trusts are also useful for large estates, as they can help avoid taxes. Due to the flexible nature of trusts, they can be structured in a way that minimizes or eliminates the need to pay estate taxes. Additionally, trusts can help protect the privacy of the individuals involved. Since trusts do not have to go through probate, which is a matter of public record, the terms of the trust are not accessible by the public.
Although a useful option, trusts are not right for everyone. Because of this, it is wise to speak with an experienced attorney before beginning the estate planning process. An attorney can assess your situation and recommend the estate planning solution that would best carry out your goal.