If you are planning your estate, there is a major question you probably are asking yourself: “Should I have a trust instead of a will?” Most people know that they have an alternative to a will, but few people really understand the difference between these two estate planning options. There is no right answer because each option has its own set of advantages and disadvantages.
Having a Will
The first thing you should know is that having a will is a very good idea. It is recommended that everyone has a will, because it handles more than just your estate. There are legal matters your will addresses as well. The real question you should ask yourself is, “Should I have a trust in addition to my will?”
Having a Trust
So why might someone want a trust? Unlike a will, a trust is an agreement between you and the trustee. When whatever condition you set is met, the contents of the trust will be transferred to whomever you designated according to your exact specifications. The biggest advantage a trust offers is control. You can choose who receives what and set conditions on each item. For example, if you want to leave your grandchild a car, but only if he or she has a driver’s license, you can do that. You would not be able to have that kind of control with a will.
There are two other advantages a trust has:
- Avoiding probate
- Avoiding taxation
A trust is not controlled by the court system, which means it is not bound by the slow bureaucratic process that a will is. Your loved ones would be able to receive the contents of a trust faster than a will, because a will needs to go through probate. Additionally, a trust is not taxed in most cases. Estate taxes are usually quite low, but the trust fee may be more appealing than taxation to some people.
However, a trust is not without some drawbacks. While not being bound by the courts is a good thing in some ways, it also makes a trust risky. There is no authority to govern that your wishes are carried out. You should only set a trust up with someone you have utmost confidence in. Untrustworthy people can simply steal from your trust and there will be very little anyone can do about it.
A trust can be a powerful tool, but it should only be used cautiously and correctly. An estate planning attorney can help you protect yourself.