You may have heard that you do not need a will as part of your estate plan if you have a living trust or even a revocable trust. However, trusts and wills provide very different functions in your estate plan. As a result, you generally cannot completely replace your will with a trust. Instead, you may want to use both estate planning tools to meet your estate planning goals.
The biggest reason that people try to use a trust instead of a will is that any property that passes through the trust does not have to go through the probate process.
Probating your will involves setting up an estate with the court and administering your assets to meet the requirements of the will. Probate can be both time-consuming and expensive in many situations. It is also a public process, and if you are interested in maintaining your loved ones’ privacy after you pass, you might want to forego the probate process. Using a trust can help you do that.
When you transfer assets to a trust, they do not have to go through probate. Instead, a trustee administers them, which can include distributing those assets to beneficiaries or maintaining them, so the income goes to your loved ones.
Some assets cannot be transferred into a trust, such as a retirement plan accounts like 401(k)s, profit-sharing plans, and individual retirement accounts (IRAs). While you can transfer other types of assets, that may not be practical—like furniture and jewelry, for example.
A will can also set out who you would like to be a guardian for your minor children. There is no mechanism in a trust to legally designate guardians.
It is also generally a good idea to have a will as a “catch-all,” even if you have a trust as well. There might be assets that you intended to put in the trust but were not transferred properly or fully for some reason. Your will serves as a legally enforceable way to ensure that all of your property ends up where you intended it to be, even if it is outside the trust.
Having a combination of a trust and a will might be a good option for you. A trust can help your loved ones avoid probate and cut down on estate taxes when used properly.
Talk to the team at the Law Offices of Charles D. Stark to learn more about the estate planning tools that will work for your goals.