Will or Trust: What Do You Need?

I get asked multiple times per month by prospective clients whether they need a Will or a Trust. I always answer this question with a question of my own. What goals are you trying to accomplish? Will based plans and Trust based plans are not like comparing apples to apples. A more apt comparison would be a car to a boat—the frames are entirely different.  

Let’s break down the main tenets of each, beginning with a Will. A Will is a document you establish to govern how you want assets owned in your individual name, that don’t have a beneficiary designation, to be distributed upon your death. The Will nominates someone to handle your affairs after death, called an Executor, and names the persons to whom you want assets distributed. 

While movies make it appear that when a loved one dies, we simply gather at the attorney’s office to read the Will and split the assets at that time, real life is a little bit different. 

When relying on a Will to distribute these individually owned assets that don’t have beneficiaries previously designated, those assets, and therefore the Will, MUST go through the probate court process. Wills do not avoid probate! 

The proceedings are public. The process is lengthy—usually well over a year. And the expense is significantly greater than you expected when you signed that Will. Fees are tied primarily to the overall size of your estate. Attorneys who handle probate follow a fee schedule that is often derived by local county rules, and depending on the size of the estate, the attorney gets a certain percentage of the assets. Spoiler Alert: That Will you purchased for $100 is going to cost your estate, i.e., your beneficiaries, a much greater expense.

Trusts are private documents you establish to govern ownership over assets which you transfer into that trust, or to direct specific assets to as beneficiary upon your death. Trust-owned assets avoid probate, meaning the administration is handled privately. You appoint a party called a Trustee to handle the administration and distribution to your named beneficiaries. 

Trusts do not require court supervision. All of the rules regarding the assets owned by the trust and how and when said assets will be distributed to the beneficiaries you name are established when you create the document. In other words, you have control over the aspects of your plan most important to you. Particularly, you name who gets what and have flexibility to put guardrails on those distribution patterns, and the court won’t have to play third-party officiant over the proceedings.

While trusts still require administration and attorneys are often involved in guiding the Trustee’s actions, the fees associated with trust administration can be smaller than probate fees because the fees aren’t scripted by local county rules. Rules written by whom? Those same attorneys who have always utilized them, of course. If there are ten action items involved with trust administration, the individual acting as trustee may feel confident handling steps one through seven on his or her own, and the attorney may only handle the other three steps.

Speaking for our firm specifically, we generate fees for trust administration commensurate with the amount of work placed on our desk; rather than probate fees which are nothing more than a function of how much money you have, meaning the more wealth you hold will result in higher probate fees. 

One important concept to understand with trusts is that NOT ALL TRUSTS ARE CREATED EQUALLY. While all trusts avoid probate on the assets owned by that trust, different types of trusts have other goals that can be accomplished. 

Some trusts are designed to help protect assets from potential, future long-term care costs. Some trusts are designed to hold assets for a beneficiary who receives governmental benefits due to a disability without interfering with or disqualifying said beneficiary from those benefits. Some trusts are designed to protect the beneficiaries from future creditors, such as possible divorces, judgments, other liabilities, etc.

Next time you think about your plan, ask yourself if it’s even accomplishing your goals. And if you aren’t sure, give us a call and schedule your complimentary consultation for a second look to confirm your concerns are being addressed, or will be addressed.