I’m often asked what the difference between a will and a trust is. This post isn’t about the technical differences, but about the actual benefits a trust offers over a will.
1. A trust avoids probate
A properly funded trust keeps an estate from the long and potentially expensive court process of probate.
2. A trust is private
Unlike wills, which are a matter of public record, trusts are private. As part of the probate process an executor or executrix will have to file an complete inventory of all the assets of the estate. For an estate going through probate, anyone who cares to look will know exactly what your estate consisted of, and who the beneficiaries were. In contrast a trust does not have to be filed with the court and only the beneficiaries of the trust are entitled to an inventory of the trust assets.
3. A trust is fast
Unlike probate, where there are forms, paperwork, processes, and statutory timelines, a successor trustee can usually get right to the distribution of assets. He or she can also have the freedom to use their best judgment for covering necessary estate expenses. Distribution under a trust can be quick and simple.
4. A trust is cost-effective
The probate process has built in expenses – court filing fees, publication notices, and of course a statutory fee schedule for attorneys and the executor or administrator. The well-kept secret for attorneys is that the fees on average are well above what would have been billed on an hourly basis. Often, if a trustee does need an attorney’s assistance with distribution the cost can be 25% or even less over what the cost of probate would have been.
5. A trust gives you control
An executor has a very limited role: their duty is to simply collect the estate assets and distribute them to the beneficiaries. A trustee by contrast may have the duty to keep the funds, invest them wisely, and distribute them at particular times or for particular purposes. For example, a trustee may keep the funds for educational purposes, or to assist in the purchase of a house or business. When you create a trust, you can be creative in your approach to when and how your beneficiaries receive the estate.
6. A trust can offer creditor protection
A unique feature of trusts, creditor protection can be added at the cost of some control over the funds. This possible added feature is not for everyone and every situation, but can be a very important and useful tool in protecting beneficiaries, and sometimes simply ensuring that the funds or assets stay in the family.
7. A trust can meet unique goals
Trusts can be specifically designed to keep an estate under the Estate Tax Exclusion amount so as to avoid estate taxes. They can also be used to assist in the qualification process for Medi-Cal or for veteran’s benefits. They are especially useful in providing for people with disabilities that may not have the capacity to manage their own money. A will has its place, and every estate plan our office prepares has one as a back-up document. These seven items should give you some things to consider when you evaluate whether a trust or will is right for you.