Estate planning can appear daunting, and even confusing. Even once you’ve overcome any mental barriers associating it with your or a loved one’s mortality and begin to think about planning in earnest, you may be overwhelmed by the multitude of options in front of you. If you are reading this, you’ve already taken a significant step toward making an educated and loving decision for your family about what is best for you and, ultimately, for them.
A good place to start from is the difference between a will-based and a trust-based plan. All estate planning attorneys may vary in the particulars, but certain fundamentals are universal.
A will-based plan is at its core more familiar to the average person. The key document, a Will, does not include a Living Trust. A Will can name guardians for your minor children, and name the person who will be responsible for handling your estate (your personal representative), and it can say who you want to get what (your beneficiaries). It cannot put conditions on when someone is going to get anything and it cannot make people do or not do certain things with the property you leave them. A Will must go before the probate court, which is a public proceeding, so the inventory list of everything you own, the list of every bill you owe, and who is getting what and how much is all available for anyone to see, including the press (if you are name-worthy) and people who want to market to (or even potentially exploit) your beneficiaries. Some attorneys may leave it at drafting a Will, but if you come to me and choose my Family Plan, which is will-based, your legal documents will include a Health Care Directive, Power of Attorney, a Will and, if you have minor children, a Kids Protection Plan®.
A trust-based plan goes further–a Living Trust is a legal entity in and of itself, separate from you, and can hold title to your assets into the future. A living trust has the rules for dealing with your property built in, so you can put conditions on when and how much your beneficiaries receive, and when done with certain provisions, can protect your estate from taxes and protect your beneficiaries from creditors and future divorces. Because your living trust is separate from you and already has a legal mechanism in place for transferring your property and someone in place to manage it (your Trustee), it doesn’t have to go before the probate court. Therefore, the inventory of your assets, the list of bills that you owe, and what you are leaving behind to whom and how much is all kept totally private. It’s important that you have all your property held in your Trust, or else anything that would be subject to probate will have to go through that public process to get transferred into your Trust after your death, defeating one of the goals of trust-based planning. When you come to me, I will offer you my standard Trust Plan and the more extensive Wealth Plan. Both include all of the legal documents included in the Family Plan above, PLUS one or more Living Trusts.
And the practical difference?
The primary feature that distinguishes a trust-based plan from one that is will-based is that the trust-based plan avoids the court system entirely and allows you to make rules about your estate’s distribution. Where a will-based plan requires that your family go to a probate court to gain access to your assets and only allows for an unconditional distribution, a living trust is far more dynamic.
The probate procedure involves a significant cost that goes beyond its monetary expense: it is time-consuming even when the matter is urgent for your family; it brings a family’s private affairs out into the public domain; and, ultimately, it’s just plain unnecessary. This is the consequence of limiting your plan to a will, instead of using a trust.
There is more work for you to do upfront when first establishing a trust–the entirety of your assets must be placed in the ownership of the trust and life insurance assets must designate the trust as beneficiary (at least as contingent beneficiary as a back up)–but I am there to help you through that. Or even do it for you, if you would rather have me handle it.
Some attorneys may just leave it at that, but I don’t like to view estate planning as a static transaction. Your family’s circumstances will undoubtedly change in the years ahead, so I offer a free review process every three years or a membership plan for more frequent updates to ensure that your plan adapts to your changing life and even changes to the law.
During your family estate planning consultation, we will walk you through an assessment of whether a Will-Based Plan or Trust-Based Plan is right for you based on the specifics of your goals, your family circumstances, what you own now and where you are going in the future. One thing you can be sure of is that we will help you make the right decisions every step of the way. Call us today at (612) 206-3701 or fill out our contact form to set up an appointment.