An effective estate plan will be multifunctional and flexible enough to adapt to unknown future events. A good way of creating a flexible estate plan is through the use of a trust. However, that begs the question: if I have a trust, do I still need a will? To understand the answer to this question, you must first understand how your property passes whether you use a will or a trust.
Any asset you own, whether it is real or personal property, will pass through your will, unless you have the ability to assign a beneficiary. For example, you can assign a beneficiary to a bank account, retirement account, life insurance policy etc. Whatever you do not assign a beneficiary to will pass through your last will and testament.
If your property is passing through your will, it will be subjected to the probate process. Probate is method by which the wishes of the testator/decedent (the maker of the will) are carried out any creditors of the decedent’s estate are paid, and the property is distributed to the legal heirs. This process can be lengthy, complicated, expensive, and open to creditors. A good estate plan looks to avoid probate because of the inefficiency and liability it presents.
The use of a trust is a great method to avoid probate. Any property you put into the trust will automatically pass to the beneficiary upon death. There is no lengthy process for the beneficiary to receive their inheritance. By avoiding probate, the trust also side-steps the risk of lengthy probate litigation.
Additionally, whatever you put into the trust will pass through the terms of the trust. The terms of the trust can be as creative as you want them to be. This is an effective way of creating generational wealth because it allows you to have a proverbial hand outside the grave, controlling the property for generations long in the future. Let’s say that you may leave a certain amount of money in a trust to your children. You could put terms in the trust that instructs the trustee to invest and grow that money. The terms could also instruct the trustee to only pay out for the education of the beneficiaries or their children. That way, if your goal is that future generations have the opportunity to get a quality education, a trust will help you accomplish that goal.
Trust over Will?
If you create a trust, you should plan on passing everything—that does not already have a beneficiary assign to it—through the trust. Whatever you can conveniently place into trust should be done shortly after creating the trust or obtaining the property. That way, everything of significant value passes through the terms of the trust and to the people whom you want to leave it to.
However, the trust does not eliminate the need for a will. A will serves many functions. And, in conjunction with a trust, it can serve as a back-up document to pass assets. Let’s say that you put most everything into your trust, but you left a few assets of significant value floating out there. Or maybe you acquired property after you create the trust and you forget to put it into the trust. Your last will and testament will ensure that the property still goes to who it’s supposed to go to. In fact, many individuals who have trusts also have pour-over wills. A pour-over will ensures that any property not already in the trust goes into the trust upon death. The will thereby “pours” the property over into the trust. The property will then pass through the terms of the trust as if it had been put into the trust in the first place.
A trust is a great way to pass property and avoid probate. However, just because you have a trust doesn’t mean you don’t need your will. If you have questions about trusts, will, probate, or any estate planning matters, the experienced attorneys at McIntyre Elder Law are ready to help.
Brenton S. Begley
Elder Law Attorney
McIntyre Elder Law
“We help seniors maintain their lifestyle and preserve their legacies.”
PO Box 165
Shelby, NC 28151-0165