Why The Difference Between Wills And Trusts Have A Significant Impact On Estate Planning
KAYSVILLE, Utah – When you hear the words “estate planning,” you might think of someone who is pretty wealthy. But, financial advisers say everyone needs an estate plan such as a will or a trust.
Both have a similar goal, in that they are legal tools to pass assets from a deceased person to their beneficiaries. But they function quite differently.
As far as fun things to do, “estate planning” probably is not on anyone’s top ten list. But, if you die without an estate plan, the state has its own plan on who gets what.
“If you don’t like that plan, then you might have assets going to people that you would have not wanted them to go to,” explained estate planning attorney Eric Barnes of the ElderCare Law Firm.
It is a chief reason why Barnes recommended everyone to have a will.
“It’s really about creating a structure and a plan so that when you are gone, that everybody has some things to follow, some marching orders, if you will. And, it protects family relationships and decreases the likelihood that there will be contention within the family,” he elaborated.
Another tool Barnes said anyone who at least owns a home should also consider is a trust.
“A trust is more like a box that you put your assets into and then the trust owns the assets, instead of you as an individual,” explained Barnes. “And, so when you die or become disabled then we don’t have a problem. We can just have a successor trustee step in, take over that box, if you will, and follow your instructions.”
A chief advantage a trust has over a will is probate court is not necessary. That’s the legal process that authenticates the will, locates the deceased person’s assets, notifies and pays creditors, and distributes the estate.
“It usually takes at least a minimum of 120 days to get through the probate process,” said Barnes. “We do have to give notice to everybody.”
But, in a trust, your heirs inherit what you want them too, without the hassle of the probate process.
Another possible drawback to a will, is that it once it his probate it becomes public record. Anyone can go into the courthouse and see what you left behind and to whom you left it.
“We live in a society where we get more and more concerned about privacy, especially because of fraud, identity theft and these kinds of things,” Barnes said.
Another point to consider about wills is they only take effect, after you die.
“We call it an ambulatory document. It doesn’t actually come into effect until you are deceased,” he explained. “A trust is in effect during life and so it can, it’s a really great vehicle to manage assets in the event of a disability.”
But, wills have their advantages, too. Generally, they’re simpler to set up and change and cost less than trusts. And through a will you can name a guardian for your minor children.
Whether you have a will or a trust, or both, Barnes stressed the importance of revisiting your estate plan at least every few years.
“Especially as you get older,” said Barnes. “Do you want a trust that just takes care of post death planned? Or, do you also need to have a plan that takes care of maybe a long term crisis? Because, that’s really the biggest risk that faces your estate is a long term care crisis, over lawsuits or anything.”