So you’ve decided that it’s high time you get your estate in order. You’ve been thinking about your family and kids and want to make sure that they’re taken care of when you’re gone.
The only problem is that you don’t know where to start. You’ve got one group of people telling you to make a will and another group telling you that a trust is the way to go.
Which one should you choose???
Well, great question!!! Let’s discuss this for a moment.
The question is “which estate planning document is the better choice?” Before we get into answering that question, lets define a few terms.
- Last Will and Testament: A will is a legal document wherein you, the Testator (male) or Testatrix (female) direct how your estate (everything you own at death) should be distributed. A will only becomes effective at death.
- Trusts: A trust is very much like a will in that you are directing how certain property is to be managed and distributed. The biggest, and most important, distinction between the two is that a trust becomes effective immediately. A will, as mentioned above, doesn’t become effective until death. Also, a trust can be either revocable or irrevocable.
Now that we know the difference between the two, let’s discuss which is the better option.
So the first thing you have to consider is when you want to relinquish “control” over your property. If you create a will, you’ll have complete control over your property until the moment you die. If you create a trust, you’ll have to relinquish some or all control over the property that your place in the trust.
But relinquishing control now, as opposed to waiting until death, may be a really beneficial move on your part. If you happen to be fairly wealthy, it may be in your best interest to get rid of some property now due to federal estate taxes. Talk to your accountant to learn more.
Perhaps you have young children in your life that you want to take care of. Lets say you have a large some of money that you want to give to your children. If you don’t care how they use it, place that money in your will and name your children as a beneficiary. But, if you only want your children using the money for a specific purpose, a trust may be the better option.
In a trust, you will appoint a Trustee (or Trustees) who will be responsible for maintaining the trust property and then distributing it per your instructions. So, you could set up a trust and place that large sum of money in it. Then, you simply instruct your Trustee(s) to only use it for educational purposes or medical purposes, or whatever purpose you want.
Setting up a trust in that situation would allow you to provide for your children without having to worry about how the money is being used.
Choosing a Last Will and Testament over a Trust, at the end of the day, really depends on one thing: how much control do you want to retain over the specific property? That’s the “big” question you have to answer.
If you want to retain full control over your property, a will may be the best bet.
If you’re ok with giving up some or all control, then a trust is an excellent option. Plus, with a properly drafted trust, you can avoid Probate Court!!!!
So “relinquishment of control” is probably the biggest consideration when deciding between a will or a trust. Both can be used to accomplish your goals, however. In fact, I’ve set up many estate plans that incorporate both.
That’s what makes this area of the law so interesting (well, at least to me). You have the specific goal in mind, we just have to use the law to figure out how to reach it.
Good Legal Heath.