The question inevitably crosses my desk at least once a month, “Do I really need a trust, isn’t a will enough?” Predictably, the returning answer of any attorney is “it depends.” There are many similarities and differences between a will and a trust, and whether you should choose one over the other depends on many factors: the size of your estate, your privacy needs, whether you own a home, whether you want to avoid probate, whether you have any underage or special needs children or grandchildren, etc..
A will is typically more cost-effective to create, is used to control the administration of your estate once you pass away, and can be a sufficient estate planning tool for some families. While a will accomplishes the above goals, it has drawbacks as well. Many families are not aware that wills do not spare their family members from the rigorous and costly process of probate, where a substantial portion of the estate is lost to administrative and attorney costs. Many people are not aware of the tax implications of passing property through a will, and the vast majority of clients I speak with are unaware that once an estate is probated, a public record exists of all of their assets. Finally, after a will is probated, the inheritance may go to underage heirs or heirs with special needs without further direction or control on how this inheritance is to be used.
Trusts, however, accomplish the same goals as a will in addition to goals typically desired by all families. A trust may be used to avoid probate and the additional costs and fees associated with it. Additionally, since a trust avoids probate, assets that pass through a trust will not become public record, further protecting your family’s privacy. Investments and homes inherited through a trust may also receive beneficial tax treatment in the form of a step-up in basis, resulting in the avoidance of large capital gains tax. Finally, the grantors who have created the trust may further direct how their inheritance is to be used after they pass away, which is a great tool for ensuring that children or grandchildren use their inheritance for college or even as a down payment for a home.
If you have already created an estate plan to provide for your family once you pass away, I applaud you and your foresight. If you have not, or realize that you have not accomplished all of your goals, I strongly encourage you to consult with an estate planning attorney to ensure that all of your family’s needs will be covered upon your passing.
Please note that this article is a general summary of law and omits many important details, footnotes, and caveats. It is no substitute for legal advice from a lawyer based on your particular circumstances.
For more information or to speak with a lawyer, please call us at (530) 268-5485, visit our website, www.LenhartLawOffices.com, or send us an email at Gabriel@LenhartLawOffices.com.