Estate Planning: Why is a Trust Far Superior to a Will?

Lawyer Lisa
Lawyer Lisa

Sponsored - There are two main categories of legal documents that an individual may use to direct the distribution of their assets after death. The first and perhaps most recognizable document in all of estate planning is the Testamentary Will, also known simply as a Will. In a Will, the maker of the Will, also known as the “Testator” or “Testatrix,” provides instructions for how they would like their probate assets to be distributed after their death. The Testator appoints a “Personal Representative” in the Will to oversee the administration of the estate. The Will directs the distribution of all the probate assets. This means that assets which are not considered probate assets will NOT pass according to the terms of the Will.

What is a “probate asset”?

A probate asset will be anything owned by the deceased person at their death which was not jointly owned with a right of survivorship, and which did not have either a valid beneficiary designation, payable on death (“POD”) designation, or transfer on death (“TOD”) designation. Beneficiary designations are utilized on retirement accounts, annuities, and insurance policies. PODs will be found on deposit accounts. TODs are available for brokerage accounts and other non-retirement investments. The account owner must have affirmatively made these designations during their lifetime. If there is even one asset missing a designation or titled without survivorship, the Will is filed with the probate court and the probate process, which often lasts a year or more, commences. There is no minimum value that is exempt from the probate process.

What is a “Trust”?

Trusts are the other main type of estate planning document that can be used to pass assets after one’s death. Trusts can be revocable or irrevocable. Revocable trusts can be changed (or revoked entirely) by the creator of the trust, known as the “Settlor” or “Grantor,” while irrevocable trusts cannot be changed or revoked by the Settlor. Upon creation of a trust, the Settlor appoints a Trustee who will be responsible for managing the trust. For example, in a revocable trust, the Settlor is also usually the Trustee of their own trust. Additionally, the Settlor appoints one or more beneficiaries who will receive benefits from the trust as determined by the Settlor. Much like with a Will, the Settlor puts all of their instructions in writing in what is known as the “Trust Document.” These instructions create binding rules that must be followed by the Trustee in managing the trust.

So why is a Trust far superior to a Will?

Trusts can turn assets that would normally have to go through the probate court administration process into non-probate assets. This becomes especially important for assets that are conveyed by title, like real estate and vehicles, which, without being owned by a trust, can be difficult or even impossible to efficiently pass to one’s heirs outside of the probate process. It tends to be difficult to avoid probate on titled assets like real estate and vehicles because adding beneficiaries is generally not possible and adding a joint owner with a right of survivorship often leads to other undesirable results, such as giving away partial ownership (and therefore some control) in an asset before you intended to, possible gift tax issues, and potentially creating liability in a joint owner of property where none existed before, just to name a few. For these reasons and more, it often makes sense to use a trust in conjunction with a comprehensive estate plan as a tool to make it possible to effectively avoid probate on all assets. A skilled estate planning attorney can guide you through the types of trusts and help you choose the correct one for your particular situation.

Trusts also allow Settlors to create ongoing rules, requirements, and stipulations which will control the beneficiaries’ access to trust assets. While the probate process ultimately results in a final outright distribution of assets to the intended recipients under the Will, trusts can exist for many years and can set forth numerous rules and requirements that the Trustee must follow during the term of the trust. The possibilities are practically endless, so Settlors are able customize their trusts in ways that align with their values and will be most beneficial for each beneficiary. For example, a Settlor may decide to hold funds in trust for a child he knows is irresponsible with money until that child reaches a certain age. Another Settlor who wants to promote higher education may decide to reward a grandchild with a $10,000 gift from the trust upon their completion of a degree program.

What about Privacy?

Trusts can also preserve privacy in a way that Wills cannot. When a Will is used to distribute assets, that Will is filed with the court and becomes a matter of public record. Once the Will is filed, it can be searched by anyone who with the desire to search probate records in your county. In many counties, this search can be done online from the comfort of one’s own home without even setting foot in the courthouse. By contrast, trusts are not required to be filed anywhere in order to effectively handle assets, so the provisions of a trust document and details regarding the assets of a trust are not publicly available.

There are countless other uses for trusts, like protecting assets for the benefit of a special needs individual, preserving assets from extraordinary long-term care expenses, or providing for minor children in order to avoid the need for a conservatorship. If you don’t have a trust in place, or if you haven’t reviewed your trust in the last 10 years, reach out to an experienced estate planning attorney for a consultation. Your trust plan should be updated to reflect your current and anticipated family situation, financial profile, and goals.

For more information on estate planning, please visit LawyerLisa.com.

Lisa Hostetler Brown

5175 Sunset Blvd. Ste#1 Lexington SC 29072

Serving the state of South Carolina

Firms past performance and experience does not guarantee future results.