Two of the most common estate planning tools are trusts and wills. While both serve as a secure way to provide for the management and distribution of your assets after your death, they are set up differently and operate in different ways. To understand why so many people often choose to build their estate plan around a trust instead of a will, it is helpful to consider how a trust functions compared with handling an estate through a traditional will. The comparison reveals the ways a trust can benefit you and your loved ones.
Understanding the Basics: Trust vs. Will
A will is a legal document that outlines how you want your assets distributed after your death. It’s a straightforward way to name beneficiaries, appoint guardians for minor children, and specify your final wishes. However, after you pass away, a will must go through probate, a court-supervised process that can be time-consuming and expensive.
The type of trust used as an alternative to a will is a revocable living trust. Trusts are legal arrangements for holding property. The idea is that you create the trust, name yourself in the roles of trustee and beneficiary, and transfer property into your trust. This is more complicated to set up than a traditional will arrangement. However, when you pass away, property in your trust can be distributed directly to successor beneficiaries without the requirements and delays of the probate process.
Avoiding Probate in Maryland
One of the primary reasons to consider a trust is to avoid probate. Probate is the legal process through which a deceased person’s will is validated, their debts are settled, and their assets are distributed. This process can be lengthy, taking months or even years to complete, and can incur significant costs in legal fees and court expenses. By setting up a trust, your assets can be transferred directly to your beneficiaries without the need for probate, saving loved ones time, money and headaches.
Maintaining Privacy
Wills become public records once they go through probate, meaning anyone can access the details of your estate. Trusts, however, remain private. This privacy can be particularly important if you have specific wishes regarding the distribution of your assets that you prefer to keep confidential. By using a trust, you can ensure that your financial matters remain private and are only known to your beneficiaries and trustee.
Planning for Incapacity
A revocable living trust can also provide benefits during your lifetime, particularly if you become incapacitated. If you set up a revocable living trust and transfer your assets into it, you can name a successor trustee who will manage your assets if you are unable to do so. This arrangement can ensure that your financial affairs are handled smoothly and according to your wishes, even if you’re not able to make decisions yourself.
Control and Flexibility
Trusts offer greater control and flexibility over how and when your assets are distributed. With a trust, you can specify conditions for distribution, such as age requirements or milestones (like graduating college or buying a first home). This level of control ensures that your assets are used in a manner that aligns with your values and goals, providing for your beneficiaries in the way you see fit.
Protecting Your Beneficiaries
A trust can offer protection for beneficiaries who may not be able to manage their inheritance responsibly. For example, if you have a beneficiary who is a minor, has special needs, or struggles with managing money, a trust can provide a structured way to support them without giving them direct control over the assets. The trustee can manage and distribute the assets according to the terms you’ve set, ensuring that your loved ones are cared for in the best possible way.
You Need to Take Steps to Ensure Your Trust Can Fulfill Your Goals
Once you create a trust, you need to take the right steps to transfer assets into it. Assets that are left out and that are not set up to transfer directly in some way will need to go through probate. Your estate planning attorney should guide you through the process of transferring assets to fund your trust. In addition, you should have a pour-over will to serve as a safety net to funnel any assets left out into your trust for distribution.
Finally, you need to periodically review and update your estate plan to ensure it reflects your current wishes and circumstances. Life events such as marriages, divorces, births, and deaths can all impact your estate planning needs. Keeping your trust and other estate planning documents up to date ensures that your plan works as intended and continues to provide the benefits you desire.
Chesapeake Wills and Trusts: Your Partner in Estate Planning
At Chesapeake Wills and Trusts, we’re committed to helping you understand your options and providing the tools that best meet your needs. Whether you’re considering a trust, a will, or both, we’re here to guide you every step of the way. Call today at (410) 590-1900 or complete the online form to schedule a consultation. Let’s work together to secure your legacy and protect your family’s future.