24 Nov Is it Better To Have a Will or a Trust?
Last Will and Testament—This is what many people think estate planning is. The truth is that while a will is part of it, an estate plan is so much more. At Phelps LaClair, we believe that everyone needs an estate plan, no matter how much or how modest your estate is. We often hear the question, “Is it better to have a will or a trust?” And the answer we give is, “A trust can do so much more than a will.”
What is a will?
A will is a document that spells out your wishes for asset distribution to your beneficiaries after your death. It can include physical assets such as personal property and real estate, as well as digital assets that you have created and stored in binary form. A will names an executor who is charged with the responsibility to see that the terms of the will are carried out. A will only comes into force upon your death.
What is a Trust?
A trust is similar to a will in that it also declares your desires for asset distribution, and it also appoints a successor who will manage and close out the estate when you die. But it is significantly different and more comprehensive than a will. Here are six things a trust can do that a will alone cannot:
When you create a living trust, you are the Trustor. You are also the Trustee because you are the one who manages the trust. As such, you maintain complete control of the trust during your lifetime. In addition, you are also the Lifetime Beneficiary of your own trust. You can add or remove assets from the trust at any time. You can name a Successor Trustee so that when you pass, the assets in the trust are managed and distributed according to your desires written in the trust document.
You can protect the inheritances of your loved ones with a living trust. The terms of your trust can include provisions that protect the inherited assets from divorce claims by ex-spouses, lawsuits, and creditors. You can also specify the amount and terms of scheduled distributions to protect from irresponsible spending by your heirs. There are even trusts that can protect your assets from taxation upon your passing. These important things are impossible to include in a will.
3. Avoiding Probate
Every will must be settled by a probate court. This involves delays of distribution as well as legal and court costs that are paid out of the estate. A properly designed living trust avoids probate altogether. It is a private agreement that allows your estate to be administered privately instead of in a courtroom. This means no court costs, mandatory waiting periods, public notices to creditors, and no frivolous contests from disgruntled heirs.
4. Planning for Incapacity
A living trust can include a living will that states how you want to be cared for if you ever become incapacitated. You can name a healthcare proxy to make medical decisions on your behalf. You can also name a financial proxy to take care of monetary and business decisions if you are unable to make them yourself. A living will can also contain instructions for burial and final disposition of your body.
5. Continuity of Management
Upon your death (or the death of the surviving spouse), the Successor Trustee automatically steps in and begins to manage the estate without the delay or “red tape” associated with probated estates.
Unlike a will which is in the public domain, a living trust maintains privacy concerning who the heirs are, how much they receive, and when they receive it. This avoids unwanted solicitation and predatory lawsuits.
Everyone Needs an Estate Plan
Phelps LaClair has been serving the greater Phoenix communities for 40+ years. We have helped thousands of families have peace of mind that they will be cared for when loved ones pass away. If you are trying to decide whether it’s better to have a will or a trust, our answer is a Living Trust. We truly believe everyone needs an estate plan, and the sooner the better. We design only custom plans because every family has different needs. To discuss your needs and goals, call us for a free consultation. More than a “Last Will and Testament”, a Phelps LaClair designed estate plan will provide the assurance and protection you and your loved ones need.