Is A Trust Better Than Having a Will?

Estate planning is a crucial step in securing the financial future for you and your family. However, it requires careful consideration to ensure sound decisions are made. Both wills and trusts outline how your assets will be distributed after you pass away and designate an individual to execute these instructions. Despite these similarities, wills and trusts each have unique functions within estate planning.

What is a will in estate planning?

A will is a legal document that outlines who will receive your assets after your death and only becomes effective after you die. It names executors or personal representatives who ensure that your property gets distributed according to your wishes. Wills can protect various types of assets, such as real estate, personal belongings, and family heirlooms.

Having a will is beneficial for everyone, regardless of whether your estate is modest or substantial. A will gives you control over what happens to your assets and carries out your wishes.

The most common types of wills include:

• Simple will: This type of will specifies asset distribution, names guardians for minor children, and appoints an executor.
• Testamentary trust will: This creates a trust upon death and manages assets for minors or specific beneficiaries with conditions.
• Joint will: This type of will is made by two people, usually spouses. It outlines the distribution of combined assets and often restricts changes after the first death.
• Living will: A living will specifies medical treatment and end-of-life care preferences if incapacitated.
• Pour-over will: This transfers remaining assets into a living trust upon death.
• Holographic will: A handwritten, unwitnessed will, valid in some states with specific requirements.
• Oral will: This is a spoken will, valid in limited situations and requiring witnesses.
• Statutory will: A preformatted, fill-in-the-blank document for small, uncomplicated estates.

What is a trust?

A trust is a legal entity that holds and manages your assets during your lifetime. As the grantor, you transfer the legal title of your property to the trust. A trustee then manages, invests, and safeguards the property on behalf of your beneficiaries. Trusts offer several benefits that can protect your family from creditors and provide privacy regarding your estate's details. That includes avoiding the probate process.

One of the key advantages of a trust is the ability to control when beneficiaries access your assets. For example, a testamentary trust allows you to specify conditions under which beneficiaries receive assets. This can be particularly useful for young beneficiaries or those who might not manage money well.

Trusts typically fall within two categories, including:

• Revocable trust: A revocable trust allows the grantor to alter or cancel it at any time. With this type of trust, you can regain ownership of your assets and report any income on tax returns. While it's flexible, creditors can access your assets if you incur any debts.
• Irrevocable trust: Once established, an irrevocable trust can't be changed without the beneficiaries' consent. A grantor relinquishes ownership, which provides tax advantages and protection from creditors. The assets are managed solely for the beneficiaries' benefit.

Other common types of trusts include:

• Living trust: This type of trust is created during your lifetime and can be revocable or irrevocable. It takes effect immediately and allows you to manage your assets, specify your distribution after death, and avoid probate. Living trusts can also appoint a guardian if you become incapacitated, but they have maintenance costs and don't protect revocable trust assets from creditors.
• Testamentary trust: This is created through a will. It appoints a trustee to manage and distribute assets per your wishes after death.
• Charitable trust: This is established during your lifetime. It benefits charitable organizations, with a trustee managing the assets upon your death.
• Special needs trust: A special needs trust provides financial support for people with disabilities without affecting their eligibility for government benefits.

What is the best way to decide between a will and a trust?

Choosing between a will and a trust involves evaluating several key factors related to your estate planning needs. Here’s how you can determine which option is best for you:

• Assess the complexity and size of your estate: If your estate is straightforward, with minimal assets and beneficiaries, a will may be sufficient. For larger estates with various assets, multiple beneficiaries, or complex distribution plans, a trust can provide more comprehensive management and tax benefits.
• Evaluate control over asset distribution: Wills provide a one-time distribution of assets upon death. Trusts, on the other hand, offer ongoing control over when and how beneficiaries receive assets, which is beneficial if you have young or financially inexperienced beneficiaries.
• Think about probate avoidance: Wills must go through probate, which is a potentially lengthy and costly legal process. However, trusts can transfer assets directly to beneficiaries without probate, which can save time and legal fees.
• Plan for incapacity: Wills only take effect after your death and do not cover incapacity. Trusts can manage your assets if you become incapacitated, ensuring continuous management without court intervention.
• Weigh the costs and maintenance: Wills are generally less expensive to create and simpler to maintain. Trusts are more costly to establish and require ongoing management, but they offer additional benefits that may justify the expense.

Should I seek legal help when devising my estate plan?

When it comes to estate planning, having an experienced attorney by your side can help ensure that your assets are managed and distributed according to your wishes.

Whether you need to draft your last will and testament, set up a trust, or update existing documents, the Arizona lawyers at The Law Firm of Brown & Jensen are here to help. We offer personalized advice to help you create a comprehensive estate plan tailored to your needs.

Our attorneys are located in Mesa, Tucson, Scottsdale, Chandler, Peoria, Goodyear, Payson, and Show Low. Contact us online or call us today for a free consultation and let our experienced estate planning lawyers help you secure your legacy.