Although many people equate “estate planning” with having a will, there are many advantages to having a trust rather than a will as the centerpiece of your estate plan. While there are other estate planning tools (such as joint tenancy, transfer on death, beneficiary designations, to name a few), only a trust provides comprehensive management of your property in the event you can’t make financial decisions for yourself (commonly called legal incapacity) or after your death.
One of the primary advantages of having a trust is that it provides the ability to bypass the publicity, time, and expense of probate. Probate is the legal process by which a court decides the rightful heirs and distribution of assets of a deceased through the administration of the estate. This process can easily cost thousands of dollars and take several months to more than a year to resolve. Or course, not all assets are subject to probate. Some exemptions include jointly owned assets with rights of survivorship as well as assets with designated beneficiaries (such as life insurance, annuities, and retirement accounts) and payable upon death or transfer on death accounts. But joint tenancy and designating beneficiaries don’t provide the ability for someone you trust to manage your property if you’re unable to do so, so they are an incomplete solution. And having a will does not avoid probate.
A common reason to create a trust is to provide ongoing financial support for a child or another loved one who may not ever be able to manage these assets on their own. Through a trust, you can designate someone to manage the assets and distribute them to your heirs under the terms you provide. Giving an inheritance to an heir directly and all at once may have unanticipated negative effects, such as disqualifying them from receiving some form of government benefits, enabling and funding an addiction, or encouraging irresponsible behavior. A trust can also come with conditions that must be met for the person to receive the benefit of the gift. Furthermore, if you ever become incapacitated your successor trustee – the person you name in the document to take over after you pass away – can step in and manage the trust’s assets, helping you avoid a guardianship or conservatorship (sometimes called “living” probate). This protection can be essential in an emergency or in the event you succumb to a serious, chronic illness. Unlike a will, a trust can protect against court interference or control while you are alive and after your death.
Trusts are not simply just about avoiding probate. Creating a trust can give you privacy, provide ongoing financial support for loved ones, and protect you and your property if you are unable to manage your own assets. The creation of a trust puts you in the driver’s seat when it comes to your assets and your wishes as opposed to leaving this critical life decision to others.