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We draft many wills and trusts at Smith & Little, P.C., and we help with the administration of trusts, the probate of wills, and the administration of estates after family members pass away.
Many times we're asked about the differences between wills and trusts, and why one might be preferred over another. Here are a few of those differences.
A will can plan for your passing by designating a person to be the guardian of any minor children left behind, whether you prefer burial and cremation, how you want your property distributed after you die (and after your debts are handled), and who will be in charge of all the paperwork and court procedures necessary to making everything happen.
The process of administering an estate and probating a will can take several months or even several years, depending on the complexity of the situation, whether the executor has to wait for children to reach a specific age before distributing property to them, filing taxes on behalf of the estate, all after handling those creditors.
Expenses included in administering an estate include the fees at the probate court, newspaper publication fees, and possibly legal fees if attorneys (like us) assist with the paperwork and the process.
Trusts are quite different.
A trust is a separate legal entity, like a business, that is set up while a person is living. Unlike a will, where an executor takes charge of assets only after the maker of the will dies and the probate court approves the paperwork, with a trust the Trustee takes charge of assets and property immediately, as soon as the trust is created and the maker of the trust transfers property over to the Trustee.
The trustee must take care of the trust property carefully and use it for the benefit of the trust's beneficiaries. If the beneficiaries of a trust pass away, the trust details show who benefits next, and what happens to the property in later years -- much like a Last Will and Testament would.
Speed and Efficiency are one reason to use a trust instead of a will.
Instead of months or years for control of assets and property to change, as with a will and the probate process, control of assets and property can change from one trustee to the next in days, or even just hours.
Privacy is another reason to use a trust instead of a will.
The transfer of property from one trustee to another is private. Banks and other financial entities would know, of course, but nothing is filed in the probate court where anyone could see, and nothing needs to be published in the newspaper.
Ensuring property distribution will remain unchanged after family changes is another reason to use a trust instead of a will.
Take Bob and Alice, for example. They marry, raise a few children, and build up their assets over 25 years. Then Bob passes away and the assets are all in the name of Alice the surviving spouse. This isn't unforeseen, but then look at what happens when Alice remarries. Time passes and Alice marries Carl, and the assets built up by Alice and Bob start getting used up by Carl and his children. Years later, Alice might make a new will providing for Carl, and after Alice passes away much or even all of what she and Bob built up together goes to Carl and his kids, leaving Alice and Bob's children feeling frustrated and forgotten.
Similar situations can occur in cases involving divorce, too.
But if Bob and Alice put their assets into a trust that specifically provides for Bob and Alice and their children, this helps prevent that sort of scenario.
Protection of Assets is another reason to use a trust instead of a will.
If a trust owns your house and your other investments, whatever they might be, whether stocks or rental properties or anything else, then you no longer own those things. Even if you're benefiting from the assets by being a beneficiary of the trust that owns the assets, you no longer own them. That means if life ever lands you in a situation where a creditor is coming after you for an enormous sum of money: whether a hospital after an unexpected surgery, a person you mistakenly rear-ended, someone who got injured on your property or your business's property, to name a few possibilities, that creditor might be able to come after anything you own -- but you don't own what's owned by the trust if it's set up right.
At Smith & Little, P.C., we love helping people make plans for their family's future. If you'd like to meet with one of our attorneys to make sure your estate planning needs are met, give us a call today and let our family help yours.
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