WILL VS. TRUST – Which Do You Need?
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Estate planning clients express surprise sometimes by our response to the question: “Do I need a will or trust?” We often respond: “Both!” Most plans should include will to ensure that assets pass to the intended beneficiaries. We always use a will in concert with a revocable trust in case some forgotten assets pop up outside the trust after a client dies. Normally, the choice is whether a plan should have a revocable trust – not whether it should include a will.
You can transfer your assets to your family with a regular will, a transfer on death instrument, or a revocable trust. There are subtle, but important, differences among the alternatives. Here are some specific reasons for the revocable trust preference:
1. Privacy: If you go to the Surrogate’s Probate Court of New York County, New York, you can go to the courthouse, look up Jacqueline Kennedy Onassis’s will, and find out exactly how her estate was distributed. Alternatively, if you go to Santa Barbara County, California, you can find the last will and testament of Paul William Walker IV, the deceased star of the Fast & Furious movies, but you cannot find out who received his wealth because he placed some of it in a revocable trust and designated that trust as the sole beneficiary of his last will and testament. Unless contested, revocable trusts are generally not published as public records. Wills are probated in the local probate court and anyone can examine those public records. Many courts require that their personal representatives file inventories of all of the assets with the court. Some people dislike their family business being that accessible to public view.
2. No Estate Administration: If most of your assets are in a revocable trust when you die, you have few or no “probate assets” for the court to oversee. If the value of your probate estate is less than $50,000.00, Indiana law permits you to skip the requirement of opening an estate with the court. This can save your family the time and expense of opening an estate. The trustee of the trust can distribute your assets without seeking court approval. Additionally, no notices of your death or your estate will appear in local newspapers. However, some estates are difficult to plan to avoid estate administration perfectly. Clients should not let this goal force them into silly compromises of comfort, convenience, and common sense. You can accomplish the same result with a transfer on death instrument, but revocable trust offer more flexibility.
3. Fewer attorney fees: As a general rule, most attorneys charge much less to administer an estate where most of the assets are held in trust. If you die owning all of your assets in your own name, which pass through your will, your family can expect to pay a greater percentage of the value of your assets in attorney fees. However, the attorney’s fee for work with assets owned jointly or in trust is often lower than the fee for assets passing through a will. Depending on the size of your estate, this can be a significant savings for your heirs. This is particularly true if you have real estate in multiple states.
4. Disability Planning: A will only becomes effective upon your death. But a revocable trust is immediately effective. If you become disabled, a revocable trust can dictate how your assets will be managed and who will manage them. This can be resolved also with a power of attorney, but the trust works more smoothly.
Recent changes in the laws affecting Medicaid make it necessary to plan extensively with both sophisticated wills and revocable trusts. Many of our clients have revocable trusts and wills that have special testamentary trust embedded in them to protect assets from long-term care costs in case they develop Alzheimer’s disease or other injuries or illnesses that require nursing home admission.
Some people need to avoid revocable trusts. If you have creditors, potential adversaries, or family members that may argue about how your estate plan provides for them, the revocable trust will not protect your wealth from their claims. Moreover, some claims can be made against trusts long after your death.
Probate administration provides an appropriate arena for conflict resolution. The probate code provides rules and timetables for disputes. If claimants do not file their claims in a timely fashion, their rights terminate and your estate can be settled as planned. Probate administration can offer your family more reliability than a revocable trust if trouble is brewing on your horizon.
These choices require careful consideration of the alternatives. One size does not fit all and some people do not need wills or trusts. To be sure of the correct plan, speak with a reputable estate planning attorney.
Find more information about mediation, estate and business planning, wills, trusts, and Medicaid issues for nursing home residents at www.hawkinselderlaw.com, like our Facebook page, or follow Jeff R. Hawkins on Twitter for the latest information.
Jeff R. Hawkins and Jennifer J. Hawkins are Trust & Estate Specialty Board Certified Indiana Trust & Estate Lawyers practicing in Indiana, and Jeff Hawkins practices in Illinois. Jeff is a Fellow of the American College of Trust and Estate Counsel and the 2014-15 Indiana State Bar Association President . © Copyright 2015 Hawkins Law PC. All rights reserved.
