Estate planning ensures that your wishes are being followed, by the distribution of your assets. The most common avenues you’ll encounter are wills and trusts.
A will is a legal document, signed and witnessed, that communicates how your property and assets will be distributed after death. Revocable and subject to amendment during your lifetime, it also allows you to appoint a guardian for children under the age of 18.
A trust establishes how you distribute the assets after your death, providing lifetime and after-death property management. In order to fund a trust, you’re required to retitle your assets ownership over to the trust. The major differences between the two are cost and complexity. In this blog, our team at Ewbank, Hennigh & McVay will be sharing the pros and cons of wills vs. trusts.
Most often, wills are less expensive to set up. Less complex than trusts, retirees often choose them because it covers all their bases with an opportunity to amend when necessary. In a will, you won’t be required to manage it during your lifetime or designate a trustee to handle the affairs after your death. Though the chief benefits are simplicity and low costs, wills require probate and can run the risk of being challenged after your death.
Trusts allow greater control over the distribution of your assets. They can determine the timing or objectives in which your beneficiary receives them, along with helping avoid certain taxes. Trusts are a great way to prevent probate but typically come at a higher cost. You also must follow through on funding a trust and retitling the assets. Otherwise, the benefits can’t be realized.
Both wills and trusts are great vehicles for estate planning. Determining which one is right for you depends on your circumstances, family structure, and overall objectives. Here are questions to ask yourself if you’re still debating wills vs. trusts.
1. What are your state’s options for probate?
Many states offer expedited or more informal versions of probate under a certain dollar value threshold. If with some research, you find that probate won’t be a burdensome process, a will would be just fine.
2. Do you have younger children?
A major benefit of a trust is that it allows you to establish the specific provisions when entitling your assets. A trust allows you to exercise more control over the use of your property. This is a great option when you have multiple dependents.
3. Will you actively manage your plan?
If not, a living trust may not be ideal for you. A trust is only beneficial if assets are transferred into it. On the other hand, a will can be easily amended during your lifetime but holds the risk of being contested after death.
As you can see, there is no right or wrong answer when it comes to estate planning. When weighing wills vs. trusts, each state offers different laws regarding each use. Just remember that one size doesn’t fit all.
Regardless of which one you choose, you should create your plan around you and your family’s needs. If you have any questions regarding wills, trusts, and estate planning, we encourage you to give us a call at (580) 234–4334. Our team is always here to help!