This is the process I go through when helping people answer the question “How do I choose between a will and a Trust?”. There are other more personal factors that go into the decision than this, but here are the more tangible things to consider.
With a Will, all property not otherwise handled will go through Probate. Many people’s goal for planning is to keep their family out of Probate court. Probate in Arkansas takes a minimum of 8 months and can cost 3-6% of the gross estate (not taking out debts). Probate is a public process.
With a Trust, everything in the Trust stays out of probate. With us, we put your house and all your personal property in the Trust. It is up to you (unless you ask us to) to go to the banks, life insurance companies, and investment companies and re-title your property to the trust. Property in the Trust transfers in about 90 days, privately.
A good planner will always write a Will to go with a Trust. All the Will says is to put everything in the Trust and close Probate.
How do I Choose Between a Will and a Trust?
If you have one child, cars, one home, retirement accounts, and bank accounts you can get away with a Will and additional planning with the caveat that Probate may be required for property not properly titled to avoid probate.
If you want the best chance of avoiding probate and keeping your affairs private, then a Trust is the way to go. Probates are public. I just read a petition in a probate for over $250,000. Now the world knows how much the family will inherit.
Here is a list of things to consider when deciding how do I choose between a Will and a Trust?
- Blended family and you want his property to go to his children and her property to go to her children.
- Children with special needs that will need, or are currently on, means tested government benefits.
- Multiple pieces of real estate
- Ownership of real estate in more than one state (avoids multiple probates)
- Children that spend money as fast as they get it or like to spend more than they have. A Trust can be set up to dole the money out over time instead of in a lump sum. A Trust can also protect the money against their creditors and any lawsuits.
- Children with addictions to drugs, alcohol, gambling, and more can be protected and provided for without disinheriting them.
- You want to main control of the money and set the rules for distribution beyond just who gets what. With a Trust, you decide not only who gets what, but when and how.
- Children or grandchildren under 18 that will be inheriting. If a Trust is not created, often the court will impose one during Probate and then give them a lump sum check when they turn 18.
- Children with credit issues can have their inheritance protected from creditors with a Trust.
- Business interests are often best assigned to a Trust so that they pass without publicity.
- You want to name ahead of time who will manage assets for you if you can’t and how they are to be managed.
What Else do I Need in Addition to a Will or Trust?
- A Durable Power of Attorney. You choose who will manage your financial, personal, and legal affairs if you can’t (or don’t want to anymore). This is arguably the most important document in a plan.
- A Healthcare Power of Attorney. You pick who will make healthcare decisions if you can’t.
- A HIPAA Waiver (Protected Healthcare Information Release). You name the people that healthcare workers can share information with.
- A Living Will. This tells the doctors, if the end is very near, if you want to be kept alive on machines or not.
That is how I work through the issues and answer the question “How do I choose between a Will and a Trust?”