How Do You Know If You Need A Will Or Trust?

As wealth advisors we look at all facets of our clients lives – every way that money impacts them for good or bad. This includes estate planning and ensuring their families are taken care of in the event of an accident or death. We know enough about this

area to give general advice and point you in the right direction. That’s why when clients as us “should I have a will or trust?” – we turn to experts like Attorney Myrna Serrano Setty. Below was written by her and she’s graciously allowed us to share it with all of you!

Are you interested in a will or revocable living trust? Wills and trusts are useful estate planning tools. They serve different purposes and can even work really well together. First, let’s go over key differences between wills and trusts.

Will Characteristics:

• A will goes into effect only after you die.
• It only covers property that is in your name at your death.
• A will passes through a court process called Probate. The Probate court oversees the will’s administration and ensures the will is valid and that the property gets distributed the way the deceased wanted.
• Because a will passes through Probate, it’s a public record.
• A will lets you name a guardian for your minor children.

There is a good chance that if you care about how beneficiaries use what you’re leaving them or want someone else to manage it, you’re going to need some type of trust.

The two main types of trusts are testamentary trusts and revocable living trusts. One type of trust is inside your will and the other type of trust is a stand-alone document, called a trust agreement.

Testamentary Trust Characteristics:

• A testamentary trust is a trust that you create through your will. A will is only “activated” after you die and after your will goes through Probate. Therefore, a testamentary trust only goes into effect after your death.
• For our clients with young children who are using a will instead of a revocable living trust, we recommend a testamentary trust inside the will. That is because children can’t inherit directly while they are minors. And even if they’re not minors, it’s not a good idea to let an 18-year old inherit a lot of money at once! With a testamentary trust, your trustee (the person you trust to manage money for your children) can provide for your children’s healthcare, education, maintenance and support while your children are minors.
• You can include provisions in your trust to allow your beneficiaries to inherit at ages and stages, all at once, or for the funds to stay in the trust for that beneficiary’s care and support.
• Funds that go inside the testamentary trust first have to go through the Probate court process before they wind up inside the trust.
• The will (and the testamentary trust that’s inside it) is filed with the Probate court.

Revocable Living Trust Characteristics:

• A revocable living trust is a trust that you create during your lifetime. It is “revocable” because during your lifetime, you can make changes to it or even revoke it.
• You can use a trust to manage property during your lifetime, at your death or afterwards.
• A trust covers only property that you transfer into it during your lifetime, or after your death (via beneficiary designations).
• Property that passes through your trust avoids the Probate court process.
• The revocable living trust stays private because it’s not filed with the Probate court.
• You can include provisions in your trust to allow your beneficiaries to inherit at ages and stages, all at once, or for the funds to stay in the trust for that beneficiary’s care and support.

So If You Have A Revocable Living Trust, Do You Still Need A Will?

Yes, you still need a will, a pour-over will. That is generally a very streamlined will that basically “pours” everything that needs to go through Probate to your revocable living trust. We also call this a “just-in-case” will, in case there is property you forget to transfer to your revocable living trust.

Also, if you have minor children, you can use your pour-over will to legally nominate guardians for your children, in case you and their other parent dies when they are minors.

Ok So Do You Need A Will, Will With Testamentary Trust Provisions Or A Revocable Living Trust?

It depends on different factors and on your priorities such as:

• Do you want to maintain privacy for your beneficiaries?
• What is your budget for estate planning? (A revocable living trust costs more to set up than a will).
• Do you want to avoid Probate?
• Do you prefer everyone to stay out of Probate court as much as possible?

As you can see there is no straight forward answer to this question. Each person, their family and their assets are unique. If you would like to get personalized help, we’d love to help you. We can also connect you with excellent experience estate attorney’s for your complex needs.

Disclosure

Written by and approved for use by Attorney Myrna Serrano Setty
Call Myrna at (813) 686-7175. Schedule A Valuable Planning Session At No Cost To You.

M & A Consulting Group, LLC, doing business as CAM Investor Solutions is an SEC registered investment adviser. As a fee-only firm, we do not receive commissions nor sell any insurance products. We provide financial planning and investment information that we believe to be useful and accurate. However, there cannot be any guarantees. 

This blog has been provided solely for informational purposes and does not represent investment advice. Nor does it provide an opinion regarding fairness of any transaction. It does not constitute an offer, solicitation or a recommendation to buy or sell any particular security or instrument or to adopt any investment strategy.

Past performance is not a guarantee of future results. Diversification does not eliminate the risk of market loss. Tax planning and investment illustrations are provided for educational purposes and should not be considered tax advice or recommendations. Investors should seek additional advice from their financial advisor or tax professional.