If you are putting together an estate plan, there will inevitably be questions regarding whether you should go with a will or a trust. What’s the difference, really?
While wills and trusts can both be part of the estate planning process, they are different tools for distributing property after your death. To evaluate the positive and negative aspects of wills and trusts, it is necessary to understand some important concepts in estate planning, including:
- The role of probate in the estate-transfer process;
- The minimum value of a taxable estate;
- The manner in which assets are titled or owned.
Probate is a legal process that serves to administer the estate of the deceased. In Arkansas, probate is necessary when the minimum value of the estate is more than $100,000 if you have creditors or when the estate is contested. If the estate is valued at less than $100,000, is uncontested, and has no creditors, then heirs may receive the property without going through the probate process.
Finally, the manner in which assets are titled at the time of your death is extremely important, and will prevail over the terms of either a will or a trust. For example, a joint owner of an account of any type will receive the funds from that account, no matter what your will says. That makes titling assets properly an essential part of your estate plan, so discuss this with your estate planning professional.
So, What’s Best for You?
Now that you understand what’s at stake, which is the best choice for you: a will or a trust?
The actual answer to the question “Should I have a will or a trust?” will almost always be, “It depends.” You and your estate planning attorney or other professional should consider all of the following factors:
- The value and nature of your assets now and their projected value at the time of your death
- Your ability and your level of desire to bear the current expense of setting up your estate plan
- The ability and the willingness of your personal representative to handle a court proceeding upon your death
It also helps to understand the relative advantages of each type of estate planning device.
Advantages and Disadvantages of a Will
The main advantage of having a will is that it is simpler to create. And because it is simpler, it tends to be less expensive to produce. Even if you decide to set up a trust, it is still a good idea to have a will, and the will can be prepared to address all of your needs with the assistance of a skilled estate planning professional.
The greatest disadvantage of having a will is that probate will be required after you die. Probate can be a straightforward process, but even the simplest probate can take months or even years, and probate is usually at least a moderately involved process. If the will is prepared properly, probate involves the administration and distribution of your assets by the executor, which is the legal term for the person you appoint in your will to act as your personal representative. If you leave no will or the will is deemed invalid, the judge in probate court will appoint the personal representative. Probate of a well-prepared will can take an average of nine months or longer to complete, which means your estate will incur attorney’s fees and court costs.
If you want the simplest and least expensive option for your estate plan now, then a will may be your best option, but the cost may be substantial on the back end when you pass away.
Advantages and Disadvantages of a Trust
While setting up a trust is more involved and could cost a little more in the here and now, the long-term advantages of a trust could make it worthwhile in the long run. The basic advantages of a trust are:
- The avoidance of probate, which means your family, friends and other heirs see a quicker and more pain-free distribution of your assets;
- You can have increased confidence in the proper administration and distribution of assets because you make most of the decisions when you set up the trust and, in the case of a revocable living trust, you manage the trust while you are alive and able to do so;
- You often have greater flexibility with a trust over how and when your beneficiaries receive your assets.
Some disadvantages of trusts are that they can be costlier to create and more complex to manage than wills. Also, if a trust is not properly funded, or if assets have not been properly transferred to the trust, your assets will not be distributed the way you would have wanted them to be.
So, Which is Best For Me?
When comparing wills and trusts, the best solution will depend on your perspective. A properly executed will may suit all of your purposes and be very inexpensive to create as well. On the other hand, the expenses and delays that could occur during probate may be a significant negative factor, especially when you consider the grief and stress your loved ones will already be experiencing after losing you.
A properly established trust may work best for you and take the delays and expenses of probate out of the equation. While a trust may be more expensive to create in the first place, you may find that paying some money up front now is preferable to having your family and other heirs pay more later.
The fact of the matter is that deciding between a will or a trust can be complicated, and the assistance of an experienced estate planning attorney can be very beneficial. An attorney will lay out all the options and allow you to make an informed decision, which will go a long way toward ensuring that you choose the option that is right for you and your heirs, both now and in the future.
Speak to an estate planning attorney.
Whether you decide to use a will or a trust, it’s important to make sure you choose the estate planning device that’s right for your needs. Learn more by contacting Estate Planners of Arkansas today at 501-414-8965 for a free consultation.