A question we often hear in our office is, “Do I really need a trust or am I fine with just a will?” While a will does tell your executor how to distribute your property upon your death, a will does not avoid probate, tell people what to do if you become incapacitated before you die, or protect your beneficiaries. Many people will choose to establish a trust even when they have a limited estate because a trust can do a lot more than a will can.
Trusts are created for people from all walks of life. Creating a trust is not dependent upon the size of your estate. Whether you have one home or five homes, a trust serves the same purposes of reducing lifetime expenses, maintaining privacy, and protecting your family and assets.
Here are three reasons to consider a trust, even if you don’t have much to put into it.
1. Trust assets avoid probate.
A common reason people choose a trust over a will is because trust assets do not need to go through probate when the trustmaker dies. Instead of the probate court having to verify the assets were distributed according to the will, the trustee for the trust has the power to distribute the assets according to the documents without the court’s involvement. Avoiding probate makes an already tough time much easier for loved ones when they do not have the added burden of dealing with the very long and expensive court process. Probate can be a burdensome process that can happen whether the testator owned a small house and an old car or owned multiple properties and a brand new sports car.
By keeping trust assets out of probate court, the assets are also kept private and out of the public record. Many people desire privacy whether they have much to leave behind or not. There is something often a bit unsettling for people about knowing that someone could just walk into the clerk’s office and ask to see the court file for your estate after you have passed.
2. A trust can give instructions for incapacity.
While a will is executed before the testator dies, the will has no legal significance until the testator has passed. Because of this, a will does not name someone to make decisions on your behalf if you should become incapacitated (e.g., you fall into a coma, you’re in a car accident, or you have a stroke). However, with a trust, you can name someone to take over your trust for you in the event of incapacity while you are still alive. You can also designate how the person or a panel of people determines if you are incapacitated to the point that you can no longer manage your trust yourself.
3. A trust can protect your beneficiaries.
When a gift is made in a will, the gift is typically made outright, meaning that there are no limitations on the gift. This may seem like a great option to your beneficiaries, but it does not provide any level of protection over what you have left to them if they were to ever get divorced, file for bankruptcy, or be sued.
A trust, on the other hand, can be set up such that anything you leave to your beneficiaries is protected from any possible divorce, bankruptcy, or lawsuit. Even when you may not have a lot of assets to pass on, it is important to keep those assets within the possession of your beneficiaries instead of allowing them to be taken by or shared with an ex-spouse or a creditor.
Want to learn more about your estate planning options?
Feeling overwhelmed trying to sort out your options? Don’t worry, you’re not the only one. Many of our clients have told us that they felt overwhelmed when they first began planning, but with our help, we helped them make sense of the options and design a plan to fit their goals.
To get started with your estate planning or update your current plan, please call our office at 919-443-3035 or visit our website to schedule a free needs assessment call. You can also download a copy of our free guide Estate Planning Pitfalls: The 12 Most Common Threats to Your Estate & Your Family’s Future.