A will and a trust are two of the most important estate planning documents. A will is a rather basic document that outlines who gets what when you die. It may also name guardians for your younger children.
A trust, on the other hand, is more sophisticated because it holds assets on behalf of the beneficiaries. But, how do you know whether adding a trust to your estate plan makes sense or not?
Here are three considerations that help you determine whether a trust belongs in your estate plan
If all you have is a will, there is a pretty good chance a portion of your estate will go through probate. This is the process of distributing assets to your heirs, and it can be both time- and resource-consuming. And that is not all. Probate is a public process, meaning that anyone can check the court records and look at the assets you owned. Putting your assets in a trust will preserve your privacy.
Owning property across states
Let’s say you owned properties in multiple states. Situations like these can become complicated during your estate’s administration. Without a trust, each of your assets will go through probate in the states in which they are held. As you can imagine, this can be very daunting.
Having a trust in place allows you to set rules with respect to how and when your heirs will receive their inheritance. And these rules can take multiple forms. In your trust document, you may indicate the specific purpose that a trustee can use the assets assigned to them, such as for home purchase or college tuition. You can also set age-based rules (such as, a trustee will receive 20% of their inheritance at the age of 25, 20% at age 30, and the remaining 60% at age 40). This can help you ensure that your assets are utilized in a manner that reflects your wishes.
Unlike a will, a trust is a more elaborate estate planning document. If you find yourself desiring any of these three benefits, then you will probably find the cost of setting your trust to be a smaller price to pay.