Most people understand that having some sort of an estate plan is a good thing. However, many of us don’t take the steps to get that estate plan in place because we don’t understand the nuances between wills and trusts – and dying without either.
Here’s what will generally happen if you die intestate (i.e., without a will or trust), if you die with a will, and if you die with a trust. For this example, we’re assuming you have children, but no spouse:
- If you were to die intestate (without a will or trust), your estate and assets will go through probate and all the world will know what you owned, what you owed, and who got what. Your mortgage company, car loan company, and credit card companies will all seek payment on balances you owed at the time of your death.
After that, state law will decide who gets what and when.
- For example, if your only heirs are your children and you have not provided any instructions, state law will mandate divvying up proceeds equally. (If you don’t have children at the time of your death, your assets will be distributed to family members in descending order of relationship – your estranged uncle might inherit all of your estate, even if you haven’t spoken to him in decades.)
- Older children will get their shares immediately if they’re over eighteen.
- Younger children will need a court to appoint a trustee to manage their shares until they become adults.
- Younger children will also need a court to appoint a guardian to raise the kids – without a will, you’ll have no say in who might be appointed.
Keep in mind that since your death has been published to alert valid creditors, it’s not uncommon for predators (fake creditors) to come forth and make demands for payment – even if they’re not owed anything.
The bottom line? Dying intestate allows state law and the court to make all the decisions on your behalf – regardless of what your intent might have been. Publicity is guaranteed.
- If you were to die with a valid will, your assets will still go through the probate process. However, after creditors have been satisfied, the remaining assets go to whom you’ve identified in your will.
- If you want to leave money to your children and name a guardian for the minor ones, the court will usually abide by your wishes.
- The same holds true if you specified that you wanted to give assets to a charity, your Aunt Betty, or your neighbor.
- Keep in mind that predatory creditors are still an issue as your death has been publicized. Even with a will, probate is a public process.
The bottom line? While a court oversees the process, having a will allows you to tell the court exactly how you want your estate to be handled. However, a public probate is still guaranteed.
- If you’ve created a trust, you’ve taken control of your estate plan and your assets. Trust assets are not subject to the probate process and one of the most important benefits of trusts is that they are private. Notices are not published, so you avoid predators coming after your estate.
In your trust, you’ll have named a trustee to manage your estate with specific instructions on how, and when, your assets should be distributed.
- One word of caution – trusts must be funded in order to bypass probate.
- Funding means that your assets have been retitled in the name of your trust.
- Think of your trust as a box – signing the trust creates the box, but you would still need to place your assets into the box.
You should still have a will for any assets inadvertently or intentionally left out of your trust, and to name guardians for minor children.
The bottom line? Trusts allow you to maintain control of your assets through your chosen trustee, avoid probate, and leave specific instructions so that your children are taken care of – without receiving a lump sum of money at an age where they are more likely to squander it or have it seized from them.
Don’t let the will versus trust controversy slow you down. Contact Attorney Michael Gove at mgove@govelawoffice.com, or Attorney Amanda Carpe at acarpe@govelawoffice.com and we can put together an estate plan that works for you and your family whether it be a will, trust, or both.