Estate Planning: Will Or Trust – Which Is Right For You?
Do you need a Will? Or a Trust? It depends upon your circumstances. For some, a Living Trust can be a useful and practical tool. For others, it may be unnecessary. Below you will find some basic information that can help you when making this estate planning decision.
What is a Will?
A Will is a written document governing distribution of property at death. It is subject to amendment during your lifetime and allows appointment of a guardian for minor children.
What is a Living Trust?
A Living Trust, sometimes called a Revocable Trust, provides for property management during lifetime and after death. It is also subject to amendment during your lifetime.
A Living Trust can:
• Avoid probate after death
• Avoid costs and delays
• Plan for incapacity
• Control what happens to property after you are gone
• Prevent financial affairs from becoming public record
• Provide creditor protection for heirs
Living Trusts have some drawbacks. It is usually more expensive to set up than a typical Will and is somewhat useless unless it is funded. A Living Trust only can control assets placed into it. If assets have not been transferred, or if you die without funding the Trust, the Trust will be of little benefit as your estate will still be subject to probate.
Will vs. Trust Considerations
There are many reasons to establish a Trust, but it will involve more upfront effort and expense. To determine if you should make the extra effort and invest in the expense of a Trust, answer these questions:
Is informal probate an available option?
In South Dakota, unlike many states, probate is not a complex or burdensome process, making a Will appropriate if you do not need a Trust for other reasons.
Do you have real property in multiple states?
If you have real property in other states, each state requires its own probate for such property. This may cost more in attorney’s fees, time, and trouble. If you have real property in multiple states, consider a Trust.
Do you have minor children?
A Trust allows you to establish provisions specifying when a child will be entitled to assets. (In many cases, a Testamentary Trust can be included in a Will if you do not want a stand-alone Living Trust.)
Do you have children, grandchildren, or other dependents with special needs?
Access or control those heirs have over inherited property may need to be limited. With a standard Will, your property can be passed on to those heirs, but a Will alone does not allow you to exercise much control over their use of the property. (Again, a Testamentary Trust in a Will might also work in this instance.)
Will your estate be subject to estate taxes?
If the value of your estate exceeds the federal estate tax threshold, you might consider a Trust with tax planning provisions. Currently, the federal estate exemption amount is $5.43 million per person, and it is scheduled to increase to $5.45 million on January 1, 2016.
Will you actively manage your estate plan?
If not, a Living Trust may not be a suitable solution.
In many ways, a Living Trust and a Will accomplish similar objectives. A Living Trust, however, gives you options that a Will cannot. Those advantages don’t come without a price. Whether a Living Trust is better than a Will depends on whether the additional advantages are worth the cost. One size does not fit all. Your estate plan should be prepared to address your own personal needs.
Lisa J. Maguire, Attorney/Shareholder, practices primarily in the areas of estate planning,
guardianship and conservatorship, probate and trusts. Lisa has over 17 years’ experience assisting individuals with their estate planning needs.