A Trust-Based Estate Plan vs A Will-Based Plan

Clients often ask whether they should have a will or a trust.  After more than 23 years of working with estate planning clients, I can say that a trust-based plan is the better plan for most people.

We’ve written about trusts and wills for many years – here are links to some of our previous newsletter articles explaining trusts and wills. 

•    Trust Me, It's Like a Little Red Wagon
•    What happens if you die without a will in Georgia?
•    Why You Need a Will: Lessons from Prince's Estate

But we haven’t written about why a trust-based plan can be a better plan for most people.

In the aftermath of COVID, my recommendations to clients have changed. A will-based plan only takes effect after death, and usually requires that a petition for probate be filed in the probate court before a legal representative can be appointed to manage the estate. Probate courts are busier now.   Getting a personal representative appointed takes longer than it did before, which means there will be no one to take care of the estate for long periods of time.  Beneficiaries that need access to money may go for long periods of time without essential funds.   If the estate needs to sell property quickly before the market changes, the representative can’t timely sell those properties.

Here are the six reasons why a trust-based plan may be better than a will-based plan:

1. A trust avoids probate.  Assets held by the Trustee of a trust allow for the immediate appointment of a successor trustee, and the trustee will have access to the assets held by the trust without petitioning a court for that access.  The Trustee can sell and transfer assets without asking permission of a court. 
2. A trust is private while a will in probate is a public document.  
3. With a trust, you can provide for beneficiaries in different ways unique to the beneficiary without the public knowing.  
4. A trust is a good way to manage incapacity.  A trust will name successor disability trustees that can step in if you become unable to manage your own financial affairs.  The trust document can set up conditions that trigger the need for a successor trustee to step in and take over paying your bills, contracting for long-term care, etc.
5. A trust can control properties you own in several states.
6. A trust can provide some asset protection, if it is the right kind of trust.  While a Revocable Living Trust (RLT) does not provide asset protection, you can set up trusts to provide asset protection for your beneficiaries.  How?  When you die, if the assets remain in trust the trust becomes irrevocable.  So long as the beneficiary’s access to the assets is controlled, their creditors and predators can have access only to those assets the beneficiary can access.

Of course, an estate plan is unique to each person, so be sure to consult an attorney to determine the best plan for you.