Does it matter which you should have?
The old model for passing assets to your family was based around the will. Once someone passed away, their property was taken to probate where the will would help settle the desires of the deceased through probate court.
This was easy in the sense that you could own everything in your individual name (titles, deeds, etc.) and you wouldn’t need to transfer ownership. With the will, everything would be handled through probate.
The downside is that probate is time-consuming, expensive, and a hassle. In general, if we can avoid probate, it is a good thing.
But that was the old model – just pass everything through the will and through the court to your family or beneficiaries.
The simplest way to understand the new model is that instead of transferring everything using a will, your major assets would be put into a trust.
A trust allows you and your family to avoid probate and pass assets privately.
Now, you may or may not decide to put everything into the trust, but putting assets into a trust offers certain advantages over a simple will.
Advantages to a Trust
A trust allows you more control when it comes to what assets are passed to whom, as well as the conditions around the transfer of those assets.
What we mean by that is, with a trust, you can designate certain stipulations that would qualify beneficiaries to receive your assets upon your death.
For example, you could say that your minor children would need to enroll in college to obtain assets set aside for their college education.
There are tax benefits to trust in certain situations that help limit the tax liability to beneficiaries. Those specific situations are detailed and nuanced, so it is best to consult with and estate planning attorney around these scenarios.
Private vs Public
A trust is private, whereas a will is public. You can search and look up any person’s will, but with a trust, your wishes are kept private.
Trusts help reduce conflict once a death and subsequent passing of property occurs. When done well, a trust provides clear instructions on how assets are passed.
The trust also avoids an open lawsuit. If you only have a will, that is an open lawsuit in court (probate) and to contest it, someone would just need to file a motion.
To contest a trust, a much higher bar is required that helps limit the possibility of contesting a trust.
Role of the Will under the New Model
Under the new model, there is still an important role for the will. The will serves as a set of instructions for any assets that were not included in the trust.
For example, let’s say that for whatever reason, you purchased a car after you had set up your trust and you bought that car in your name. Well, should you pass away, that car would not be in the trust and would be subject to probate court.
Luckily, your will is in place to push any assets left out of the trust back into the trust. In the above instance, your will would push the car back into the trust and allow the car to be handled through the trust rather than in probate.
Wrapping it all up
As you can see, the new model takes advantage of both a will and a trust in an effort to keep things simple upon death and avoid court. Both the will and the trust play important roles in keeping the lives of all involved easier and the transfer of assets cleaner.