People establishing or updating their estate plans tend to have a lot of questions. Most adults have minimal knowledge of probate laws and only a rudimentary understanding of different estate planning tools.
One of the most common estate planning tools is a simple will. Many people only ever draft wills and don’t expand their estate plans beyond that basic document. Others may decide that they need to use more complex estate planning tactics, such as creating and funding a trust.
How can a testator determine whether a will is what they need or if a trust might better serve their needs and priorities?
Wills can achieve certain basic tasks
Wills generally serve three primary purposes during estate administration. They can nominate someone to serve as the personal representative of the estate. They can also name a guardian for minor children who needs support after the death of a parent. Finally, wills can provide for the direct transfer of certain resources to specific beneficiaries. If someone simply wants to leave all of their property to immediate family members and has a basic estate, a will might be sufficient. For those with more complex needs, trusts can be useful.
Trusts can serve a variety of purposes
There are many different types of trusts ranging from special needs trusts to irrevocable trusts created for tax purposes. Trusts can hold property so that beneficiaries don’t have access to those assets. That can be valuable if a testator doesn’t want their family members to sell their business or their home.
Trusts can diminish personal holdings to reduce estate tax risks. They can help people qualify for Medicaid benefits as they age. Trusts can also protect assets from collection efforts later in life or after the trustor dies.
If beneficiaries are at risk somehow, trust can be beneficial then as well. They can help someone with special needs continue to qualify for state benefits. They can protect resources from a beneficiary getting divorced in the future. They can even prevent someone from using inherited property to fund an addiction.
Those who are navigating complicated personal circumstances, high-conflict family scenarios, financial worries or high-value estates may find that trusts are particularly beneficial for achieving their goals. Drafting the right estate planning documents, possibly including a trust, can give someone greater peace of mind as they age. The right estate planning tools can create a meaningful legacy and limit personal vulnerability later in life.