When it comes to estate planning, two common vehicles are often discussed: wills vs trusts. These legal instruments serve as essential tools for individuals to outline their wishes regarding the distribution of assets after their passing. But at the end of the day, which is better: a will or a trust?
The answer to this question will usually depend on various factors, including individual circumstances and objectives. Let’s explore the workings of both wills and revocable living trusts, highlighting their advantages and disadvantages.
By the end of this article, you’ll be more informed about the basics of each instrument. You’ll also likely have better questions for your estate planning attorney about a will vs a trust for your family.
Last Will & Testament
A Last Will & Testament, commonly referred to as a will, is a legal document that outlines how a person’s assets should be distributed upon their death. It is a set of instructions for the executor, the individual responsible for carrying out the decedent’s wishes in court.
Creating a will involves specifying beneficiaries, assigning assets, and, if applicable, naming guardians for minor children. Wills go through the probate process. In probate, the court validates the document, ensures its authenticity, and oversees asset retitling and distribution.
Only assets subject to probate are affected by the terms of a will. Assets such as life insurance and retirement accounts are generally not affected by a will. The beneficiary designation controls who receives these assets.
Advantages of a Will
- Lower cost: Wills are typically more cost-effective to create than revocable living trusts. This generally makes them more accessible for individuals with smaller estates.
- Less complexity upfront: The process of drafting and executing a will is often less complex and time-consuming than creating a trust.
- Guardianship designation: Parents of minor children nominate a guardian in a will, ensuring their care and well-being in the event of the parents’ passing before the children become adults.
- Creditor cutoff: If there are debts in your name, creditors must generally file a claim against the estate within four months of publication of the notice to creditors. Otherwise, the claim is forever barred.
Disadvantages of a Will
- Probate process: Wills must go through the probate process, which can be time-consuming, public, and potentially costly. If you own real estate in another state, ancillary probate is likely required.
- Lack of privacy: Probate proceedings are public record, so the details of your estate and beneficiaries become accessible to anyone.
- Opportunity for will contest: Because of the publicity, disgruntled parties may try to contest your will. This could be an expensive fight and may significantly reduce what your beneficiaries receive.
- Limited flexibility: Wills usually don’t provide the same level of flexibility as trusts when it comes to managing assets, particularly in complex situations.
Revocable Living Trust
A revocable living trust is a legal entity that holds and manages assets during the Settlor’s (creator’s) lifetime. It also specifies distribution of those assets upon their death. Unlike a will, a trust avoids probate for the assets it holds.
Trust instruments are generally lengthier documents than wills. There are many administrative provisions, including the powers that the trustee(s) have, what assets are included in the trust, and how the assets are to be managed and distributed.
There are more complex considerations with creating a will vs a trust. But the additional complexity does come with significant benefits.
Advantages of a Revocable Living Trust
- Probate avoidance: Assets held in a trust generally bypass probate, saving time and money. This includes avoiding probate in another state if you own real estate outside Tennessee.
- Privacy: Trusts offer greater confidentiality as they are typically not part of the public record. Trust instruments frequently state that there is not to be court oversight of its administration.
- Prevention of a contest: It is much harder to find a trust than it is to find a will in probate. If a disgruntled party cannot find the trust, he or she cannot bring an action to contest its terms.
- Flexible administration: Trusts provide a more versatile means of managing assets, especially for complex or ongoing situations. In Tennessee, trusts may last up to 360 years.
Disadvantages of a Revocable Living Trust
- Higher upfront costs: Because of the extensive nature of trusts, creating and funding a trust is usually more expensive than just drafting a will.
- Ongoing maintenance: Trusts require regular maintenance, including updating as circumstances change. It is easier to amend a trust than a will, but as life changes, the trust instrument should be in alignment at all times.
- Complexity: Managing a trust can be more intricate than handling a will because of the management requirements during life and after death. This is especially so if the trust estate will not be distributed to the beneficiaries immediately.
- Need for a pour-over will: Even with a trust, it is necessary to have a will alongside it to “pour over” assets that may not be included in the trust. A will is also necessary to name guardians for minor children.
Final Thoughts on Wills vs Trusts in Estate Planning
The decision between a will vs a trust depends on your specific goals and circumstances. Wills are often suitable for those with smaller estates and no minor children or businesses.
On the other hand, living trusts are often a better fit for parents of minors, business owners, those with real property in other states. They also work for those who simply want to avoid probate and have greater privacy.
Ultimately, the choice should align with your objectives and preferences. It’s advisable to consult with an experienced estate planning attorney who can provide guidance on a will vs a trust.
If you’re uncertain about which estate planning tool suits your needs, Connell Law, PLLC can guide your decision-making. Our staff will help you understand the nature of your situation and which documents are most likely to carry out your wishes.
Let us help you plan today so that you and your loved ones can have a more peaceful tomorrow. Reach out today to schedule your free consultation.
