One of the first questions that those setting off on the estate planning process will often ask their attorney is: “Do I need a trust?” While most of us recognize the need for a Last Will and Testament, much confusion swirls around the concept of trusts and when they are needed. Trusts accomplish many purposes that
Trusts vs. Wills
A trust is an estate planning document that creates a fiduciary relationship that will allow a third party, the trustee, to hold assets on behalf of the named beneficiary. With a trust, you will transfer your assets within the control of the trustee before your death. In contrast, a will allows you to name whom you want to receive your assets. The assets will remain titled to you up until your death, upon which time the court will distribute the assets in accordance with your wishes.
Benefits of a Trust
Often, people believe that only the wealthy need
- Avoidance of probate: If you have a Last Will and Testament alone, your estate will need to go through probate. Probate can be an expensive and time-consuming process. As your will goes through probate, your assets will be reduced by court and attorney’s fees. Your heirs will additionally be forced to wait for the funds they may need for financial security.
- Control over your wealth: A trust allows you far more control over your assets than a will. While your will allows you to name who will receive which assets, a trust has the potential for precise terms that can keep the assets in the family. You can stagger the distribution of assets or allow assets to be distributed only to beneficiaries that meet certain criteria, such as incentivizing your child to graduate from college.
- Privacy: The probate process is a public one, meaning that your wealth and estate plan will generally become a matter of public record. A trust, on the other hand, is entirely private. Using a trust will allow you to keep your assets and beneficiaries out of the public eye.
There are numerous benefits to using a trust, and a wide array of types of trusts potentially at your disposal. Consult with an estate planning lawyer for more assistance with crafting your ideal estate plan.