Everyone has heard of Wills and Trusts. Most articles written on these topics, however, often presume that everyone knows the basics of these important documents. But many of us don’t – and with good reason – as they’re rooted in complicated, centuries-old law.
Let’s face it, if you’re not an estate planning attorney, these concepts tend to remain merely that – concepts. So, if you’re “fuzzy” about Wills and Trusts, know that you are not alone. After you see the difference between these two documents, you will understand why a Trust is the better choice.
Wills vs. Trusts: Defined
Let’s take a minute and define both “Will” and “Trust”:
Will. A Will is a written document that is signed and witnessed. A Will is considered a “death” document as it only goes into effect when you’re no longer here.
● provides for the distribution of assets owned by you, but not assets directed to others through beneficiary designations (e.g. life insurance or retirement benefits)
● sends assets in your individual name or payable to your estate through the probate process
● allows you to appoint permanent guardians for your minor children
● names the person you wish to settle your estate (e.g. executor or personal representative)
● doesn’t always include protective Trusts for beneficiaries and tax planning because many Wills are simple 2 to 3 page documents
● does nothing to prepare for incapacity or disability
● tends to cost less than a Trust on the outset but costs more to settle during court proceedings after death
Trust. A Trust is a legal document, and it is effective during your lifetime, during any period of incapacity or disability, and after death. Because the Trust is effective during your lifetime and you can change it, it’s referred to as a “living” document.
● has lifetime benefits
● provides for the distribution of your assets
● avoids probate if fully funded
● provides for a successor Trustee upon your death or incapacity, someone you choose to automatically step in and take over without court intervention
● allows for the management of your property – even if you’re incapacitated
● enables you to keep your affairs private
● often includes protective Trusts for beneficiaries and tax planning
● permits you to revoke or amend your wishes during your lifetime
● costs more than a simple Will on the outset but much less upon administration, while typically providing significantly more value
The Probate Process: A Key Element in Deciding Between a Will and Trust
One key element in deciding between a Will and a Trust is understanding the probate process. The term “probate” – which literally means “proving” – refers to the process wherein a decedent’s Will must be authenticated, outstanding legitimate debts paid, and assets transferred to the beneficiaries.
The downside is that probate can take a long time – even years – it’s expensive in many places and the entire process is completely public. Because of the public nature of probate, anyone can find out exactly who received what and how to contact them. In virtually all cases, the only upside of probate is that creditor claims are cut off.
● Probate Guaranteed. If you use a Will as your primary estate planning tool, you own property in your individual name, or property is made payable to your estate, probate is guaranteed.
● Probate Avoided. If you use a Trust as your estate planning tool, probate is avoided – saving your family time, money and privacy.
The Bottom Line on Wills vs. Trusts
HOW TO DECIDE: As everyone’s situation is different, it’s important to analyze every aspect of your situation – and what the future may hold – so that you can determine what’s right for you and whether probate avoidance, incapacity planning, and Trust protections have value to you and those you love. Most people receive the greatest overall benefit from having a Trust.
ACT NOW: Without an estate plan in place, you and your family are left completely financially unprotected and your children are at the mercy of New York State, if something should happen to you. You can call 718.514.7575 or email firstname.lastname@example.org with any questions you may have.
MONET BINDER, ESQ., has her practice in Brooklyn and Queens, New York, dedicated to protecting families, their legacies and values. All halachic documents are approved by the BAIS HAVAAD HALACHA CENTER in Lakewood, under the direction of Rabbi Dovid Grossman and the guidance of Harav Shmuel Kaminetsky, shlita, as well as other leading halachic authorities.
The information in this article is intended solely for your information. It does not constitute legal advice, and it should not be relied on without a discussion of your specific situation with an attorney.