When it comes to asset protection, having trusts and wills for your estate plan is essential. Wills and trusts allow you to name who will receive an inheritance when you die and even name your children as beneficiaries. However, some differences may make either of these legal documents a better fit for you. This article lists four benefits of living trusts and wills to take into consideration for your estate planning.
Benefits of a Living Trust
A living trust is a legal document that designates a trustee with a fiduciary duty to manage trust money and property held on trust while the grantor is still alive. There are two types of trusts: revocable trust and irrevocable trust. In a revocable living trust, a settlor can make revisions to the trust agreement, while little can be done to amend an irrevocable living trust. Establishing a trust, whether revocable or irrevocable, grants the following benefits which a will cannot give you.
- A trust estate can avoid probate. Probate refers to the legal process to validate a will, which can often be expensive and takes a long time to get through. Property in trust can bypass the probate process, so you can rest assured that assets held in trust can be distributed without interference or fees from the court.
- It’s harder to challenge a grantor trust. Challenging the validity of a living trust is difficult to do under trust law. A lawsuit has to prove that the trustor was mentally incompetent or had an undue influence when creating a trust, or that the trust documents are flawed. Talk to an estate planning attorney about how to protect your trust beneficiary if you think relatives will pursue a court battle after your death.
- You can avoid conservatorship with trusts. In a conservatorship, a judge appoints a person to manage financial affairs held in a trust should you become incapacitated. If you have a trust arrangement, you can name a competent person (such as a surviving spouse, a partner, or a child) as a conservator to give authority over property owned by a trust.
- Your trust remains private after death. Unlike living wills which become public documents after death, you can keep your trust fund and other trust assets private even after death if you have established a trust.
Benefits of a Will
A will, also known as a last-will-and-testament, is a legal document detailing how you want your assets to be distributed to your spouse, children, and beneficiary after you die. Wills are usually easier to set up since it doesn’t require the complicated language often used in trusts. Unlike trusts, a will or testament takes effect once the testator has passed away. The benefits you can gain from drafting a will that a trust cannot bestow are listed below.
- You can name a guardian for your children. Making a will allows for naming a guardian to your children should they still be minors upon your death. This can’t be done in a living trust, so it’s important to have a will in place when keeping your children’s future in mind.
- You can assign property managers for heirs. Leaving property held in trust for a minor means that the property is under trust administration until they reach a certain age. If you prefer to have someone you know and trust to manage your children’s property once you pass away you can name them using a will. If you don’t name an adult as a property manager, then the court will appoint someone to do it once the will is in effect.
- You can choose the executor of your will. The executor is the person who will wrap up your estate after you die. They will communicate with the court, pay your bills, and distribute your assets and personal property in a trust account. In a will, you can designate someone as executor, but trust law only allows for a successor trustee to be named.
- You can leave instructions for debt and tax payments. With a will, you can plan out payments and forgive debts owed to you if you wish to do so. This way, you can set certain conditions to be met before distributing your trust funds and assets in the estate to those who will inherit it.
Without a living trust or a will, your property will be distributed according to state law. If you are looking for help setting up a trust or will in Michigan, contact Entrusted Estate and Assets, PC for a free estate plan review. Our experienced estate planning attorneys will provide trust planning to help you protect your wealth and assets for your family.