Wills may not be sufficient in all situations, just as trusts may be too much "legal medicine" for yet other situations.
You are moving forward with estate planning.
You have heard two terms tossed around regarding this topic—a will-based plan and a trust-based plan.
Which one is best for you?
According to a recent Northside Sun article titled “Do You Have a Will or a Trust? Why?,” you will need to carefully evaluate your family situation and understand the differences between these two options.
So, how are wills and trusts different?
A last will and testament only has legal authority after you have died and it is ultimately used to distribute your assets through probate.
A revocable living trust, on the other hand, has legal authority while you are yet living and when it is "funded" with your assets.
This trust then provides protection for you assets from probate while you are alive and after you die.
Both privacy and efficiency are provided through a trust as it bypasses public probate or court proceedings.
These differences make a trust helpful for incapacity planning.
Can you prepare for incapacity without a trust?
You would need to have additional documents and protections in place.
What are these?
These include a general durable power of attorney and an advance health care directive.
The former grants authority to a trusted agent to act financially on your behalf while you are incapacitated.
The latter functions similarly, but for medical matters.
What happens if you do not have these in place?
Your loved ones would need to petition the court to appointed as conservators over your financial matters and as guardians over your personal and health care matters.
This is can be costly, burdensome, and invade your privacy.
Instead of titling assets to a trust, why not simply add the names of your children to your asset titles as joint owners?
Unfortunately, this approach will invite unintended consequences.
If any one of your children/joint owners is facing a divorce, lawsuit, or bankruptcy, then your assets are exposed via their "ownership" interest.
Alternatively, a trusts can avoid these risks by providing for the ongoing management of trust assets should you become incapacitated and protecting the inheritance from the misfortunes of your children when inherited.
Do you have a blended family?
If yes, a trust can also help you to provide greater control over the division and distribution of assets so your children and your new spouse are treated as you provide without triggering unnecessary litigation.
You should not do your estate planning alone.
Limit your DIY projects to minor home improvements.
Work with an experienced estate planning attorney to create either a will-based or trust-based plan to meet the needs of your specific situation and goals.
Reference: The Northside Sun (August 14, 2019) “Do You Have a Will or a Trust? Why?”