Do You Need a Trust for Estate Planning or is a Will Enough?

Will vs Trust: What is the Difference?

Although both a will and a revocable living trust are fundamental estate planning tools in Michigan, understanding the will vs trust distinction is important because each serves a different function. A probate lawyer can help you determine which option best fits your family's needs and long-term goals. A will is a legal document that states how your assets are to be distributed after death. In a will, you appoint a personal representative to administer your estate and you name beneficiaries to receive the property and assets of your estate. You can also name guardians and conservators for your minor children. A will also requires probate court supervision for distributing your estate’s assets.

A revocable living trust is designed to hold and manage assets both during and after your lifetime. One of the most important differences between a will and trust is that having a trust avoids probate administration and allows assets that are titled in the trust to be distributed outside of probate over time and for specific purposes. This can allow for a more flexible distribution of a person’s assets and provide privacy for families.

When Should a Trust be Considered for Estate Planning?

A revocable living trust should be considered when a person, or a married couple, want greater control, privacy and flexibility for distributing their assets and property. Trusts are often created for:

• Parents with minor children who desire distributions of assets to be made over time as opposed to when a child reaches the age of 18 years.
• Parents with young adults or older children who may not be financially mature to manage substantial distributions of assets given their current circumstances.
• Persons who want flexibility and control over trust assets so that distributions are released in stages or for specific purposes such as education, housing or medical expenses.
• Persons who want continuity in the management of assets if they become incapacitated, allowing a successor trustee to step in manage assets without probate court involvement.
• Persons concerned with privacy who want to keep the distribution of their assets and property confidential and out of the probate court’s records which is open to the public.

An experienced probate attorney can review your assets and explain when probate may be required and what steps can be taken to minimize it.

When Should a Will be Considered Sufficient for Estate Planning?

Depending on your circumstances and how your assets and real estate are titled, a will may be all you need as a backup for distribution of your assets and property after death. Probate is necessary when a person dies with assets and property titled solely in their names however probate, for the most part, can be avoided.

When is Probate Avoided?

• When bank and financial accounts have payable-on-death (POD) or transfer-on-death (TOD) designations and retirement and other accounts have named beneficiaries designated on the accounts. Because beneficiary designations allow your assets to be directly transferred to a named person or persons, you avoid probate administration of the assets in those accounts. Contingent beneficiaries should also be named as a backup beneficiary to receive the assets in the event the primary beneficiary predeceases the account holder.
• When real estate is titled through an enhanced life estate deed, commonly referred to as a Lady Bird Deed, title of the real estate automatically transfers upon the owner’s death (or both owners’ deaths if property is jointly owned), to the person, (or persons), named in the deed. It should be noted that with this type of ownership of real estate, the initial owner retains full control of the real estate during their lifetime with the right to sell or transfer the property. Just as you can change and update named beneficiaries on your financial accounts, you can also record a new deed to change the person named to receive your real estate property at death.
• When financial accounts and real estate are held jointly, ownership automatically transfers upon the death of one owner to the surviving owner or owners.

It is important to remember that there are potential problems with when naming minors as beneficiaries on accounts and when naming minors to receive property with Lady Bird Deeds. For example, before a bank or financial institution is going to pay proceeds to a minor, a guardianship or conservatorship may be required which can be costly and time consuming.

How to Decide Whether a Will or Trust is Right for Your Estate Planning.

The decision between a will or trust should be based on your assets, family structure along with the control you want over your assets. Also, the goal is to provide for a clear and straightforward way of distributing your assets that minimizes complications and provides clarity for your loved ones. Because wills and trusts serve different needs and goals, it is important to consult with an experienced estate planning probate attorney to help you decide which option is best for your circumstances.

Schedule a Free Consultation with Ann Arbor Estate Planning Attorney Bill Ager.

If you already haven’t done so, now is the time to consider an estate plan tailor made for you. It will cost you nothing to get some initial guidance.

In my practice at Ager Law Office, I help individuals and families throughout Washtenaw County with all aspects of estate planning, including Wills, Trusts, Durable Powers of Attorneys, and Patient Advocate Designations. To talk with me about scheduling a free consultation for a new estate plan or for updating your existing plan, call (734) 649-0784, send an email to bill@agerlawoffice.com, or use the online contact form on this website.