Will VS Trust?

I am often asked by people whether a will or a trust is right for them. As with many legal questions, my answer is usually “It depends.” When choosing between a will and a trust, there are a number of considerations you must think about before deciding which is right for you. In counseling my own clients I always start by conducting a very thorough evaluation which includes the following considerations.

How large is the estate?

One of the primary considerations on whether a will or trust is right for a client is the nature and value of the property they own. A Last Will and Testament may be a very good, simple choice for people who do not own a home or other assets. When a Last Will and Testament is coupled with a good financial power of attorney and health care power of attorney, it can provide for most needs that a person with a very small estate might have.

However, for people who own a house, a Last Will and Testament may not be the best plan. This is because properly transferring title to a home requires a court action called “probate” to properly transfer title to the home. This is why, in 1991, the AARP began recommending that homeowners plan for their estate with a Revocable Living Trust in order to avoid probate. Although probate is not a terribly difficult proceeding in Utah, it does leave some work and extra expenses for your loved ones that could have easily been avoided by using a simple trust plan.

What are your family needs, values, and goals?

In deciding between a Will and a Trust, you must consider your family. Not only must your plan address concerns with spouses, children, and grandchildren, such as health concerns and financial accountability, but you must also address your relationships. In families where tension between family members exists, you must consider whether a will, which would probably require “probate,” will cause your children to begin fighting each other in court – this turns your legacy into a public debacle.

Interestingly, a last will and testament can contain provisions which create trusts to deal with many of these challenges, but you should keep in mind that they require probate. Because of the complexity in drafting this type of will and the ultimate requirement of probate, many people prefer to simply plan for their family dynamics using a trust in the first place. This way their plan is in action from the beginning and has no requirement of probate.

Does your plan need the type of organization that a trust plan would ensure?

Perhaps one of the most important components of planning your will or trust is the PLANNING ITSELF. Because a last will and testament is a letter of instruction to your executor about what they should do with your property, it requires less planning work. Trusts, on the other hand, are “entities” which can hold title to property, similar to a corporation. In order to ensure that the trust will automatically pass property to the trust-maker’s family, a good estate plan should include some assistance with implementing the trust by transferring property such as homes, stocks, business interests, and bank accounts into the trust. The property inside of a revocable trust stays in control of the trust-maker so that you can use, spend, sell, or transfer back out of the trust.

The organizational work done in order to transfer property to a trust is often one of the most valuable parts of a trust plan. It not only provides a consolidation and centralization of your property, but also helps clients to determine for themselves how they want to better utilize their resources in providing for themselves and their families.

The decision between using a last will and testament or a trust requires consideration of the value of your property and whether a probate will be necessary, accounting for family planning needs, and deciding whether having a consolidated, centralized, and more organized plan will benefit you and your family. In making a decision, I encourage my clients to ask “What should I do to leave a legacy for my family.”

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