Do You Need a Will or Trust?

A surprising number of Americans don’t have an estate plan at all.  They don’t have a will, a trust, or any other estate planning documents in place.  This is by itself a tragedy for the survivors who are left behind.  It is hard enough to lose a loved one, but to be thrust into a sinking quicksand of legal, tax, and financial issues just makes the grieving process even more painful.

Most Americans know they should have an estate plan.  If asked, they will tell you they are planning to get “around to it”, they just haven’t done it yet.  Good intentions maybe, but no action.  The truth is that if you die without a will, the disposition of your estate may not look anything like what you intended and the government may get more than their “fair share”.

When you do get around to developing your estate plan, one of the strategic decisions you will have to make is to decide whether to have a will, a trust, or both.  Of course, this decision will ultimately be made with the help of your estate planning attorney.  But the decision is very important to how your estate will be administered and what the costs of administration will be.

Here are the basic differences and why you might choose one over the other.

A will is a document that spells out your wishes about the disposition of your estate after your death. Everything you own, including real estate, personal property, bank accounts, investment accounts, retirement accounts, etc. is your estate. Everything you own must be given away or disposed of in some way after your death. Who gets what and how they get it can be spelled out to suit your wishes.

A living trust can serve as a will substitute. A living trust can do everything a will can do. So what is the difference in the two?

One important difference is in the handling of the estate after your death.

A will typically needs to be handled by an estate attorney and will often involve the Probate Court to disperse your estate according to the terms of your will. This can be an expensive, time consuming process and is a very public process. The records of the Probate Court are available for public viewing.

Your nosy neighbor can go to the courthouse and look at a list of your assets as disclosed to the court. Assets have to be re-registered in the name of the new owner; deeds have to be prepared to change ownership on real estate. The paperwork involved can be overwhelming. Then there are the costs. Attorney’s fees and court fees can add up fast.

Contrast this scenario with a living trust.

With a living trust, most or all of your assets are titled in the name of the trust. You control the trust and have the full use and benefit of the trust’s assets during your lifetime. At your death, your successor trustee takes control of the assets in the trust and distributes them as you have directed. There is very little, if any, probate process. There is very little, if any, attorney’s costs. It is just a smooth transition without too much fuss.

So, a will is a simple, fairly low cost document to prepare and fairly expensive on the back end to administrate. A trust is a little more cost on the front end and very little cost or fuss to administrate on the back end. Plus, a trust can be entirely private, so a nosy neighbor has no options to look into your affairs.

For more on this topic, you may also want to view my Financial Briefing video “Should you have a will, a trust, or both?  What you need to know.”

Will vs. trust? You decide.

Disclosures: Investing involves risk, including possible loss of principal, and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. The information contained in this piece is intended for information only, is not a recommendation to buy or sell any securities, and should not be considered investment advice. Please contact your financial adviser with questions about your specific needs and circumstances.  The opinions expressed herein are those of the author and not necessarily those of United Capital Financial Advisers, LLC.  Opinions expressed are current as of the date of this publication and are subject to change.

United Capital does not provide tax or legal advice. Estate planning can involve a complex web of tax rules and regulations. You should consider the counsel of an experienced legal professional before implementing any strategy.