One way to establish a plan for your estate is through a will, which is a contract between you and your heirs that is enforced by the state. There can be some issues associated with wills though, including: going through probate court, cost, and the fact they can be challenged in court.
By contrast, a trust is a private contract that is living, revocable and accessible to you until you die. Then, your designated trustee is responsible for carrying out your wishes, which you articulate in a trust contract. This person is usually the representative of an institution.
Trusts have important tax, governmental assistance, probate, and personal ramifications, so an experienced estate planning attorney should be consulted at all stages of the process -- from preliminary discussions to execution of trust documents.
Here are four benefits a trust account has over a will.
The probate process makes wills into public documents that anyone can look into. This includes the size of the estate and who got what. A trust, however, is a private document that never sees a courtroom. Only the trustee and people you designate can see a copy of the trust contract, preventing quibbling over who got what.
2.) Tax treatment
There are several ways trust accounts lower individual and estate taxes. For example, they don’t include your life insurance benefits in your estate, which could easily push your estate over the threshold for federal income tax.
3.) Greater control
A will is one document specifying a single action: one disbursement of assets to a collection of heirs. If some heirs are not financially responsible, this can be problematic. In contrast, a trust allows you to pay out inheritances in smaller payments and condition them on specified milestones, like a grandchild’s college graduation.
4.) Ease of use
A trust doesn’t need witnesses, never has to be brought to court and can’t be challenged. It lets you pass your assets to heirs in the ways you think most appropriate without complicated legal maneuvering.
While it may not be for everyone, you owe it to yourself and your heirs to look at every option for estate planning. Leave your final days free for remembrance, not mountains of paperwork. A trust account may be a way to help you achieve that.