When you make an estate plan, one of the most important goals is to establish the legal framework for distribution of the property in your estate. Provisions in a last will and testament can accomplish that goal. Establishing a trust can also accomplish that goal. But there is a substantial difference between a will and a trust when it comes to distributing the property in your estate. There are other differences as well.
Property Distribution Through a Will
If you distribute estate property through provisions in a will, the beneficiary receives the property in full when the personal representative distributes the assets of the estate. In most cases, the beneficiary immediately has full access to and control over the property. They may use it wisely, or they may spend it all immediately or give it away to any one of their choosing. Creditors of the beneficiary likely will be able to access the inheritance to settle debts owed by the beneficiary. The assets can be vulnerable to other claims as well.
If you leave property or assets to a beneficiary using a will, you cannot exercise control over what the beneficiary does with the assets. However, if you use a trust to distribute estate assets, you can establish detailed conditions for distribution of an inheritance.
Property Distribution Through a Trust
Establishing a trust enables you to control and manage distribution of your property through trust provisions that remain in effect long after you pass away. To create a trust, you execute a trust document that becomes part of your estate plan. A trust should only be established with guidance from an estate planning lawyer.
In the document that establishes a trust, you designate a trustee to manage and administer distribution of the assets in the trust. The document also contains detailed terms that apply to management and distribution of the property to the beneficiaries named in the trust.
Using a trust enables you to accomplish purposes that a will cannot accomplish, such as:
- Spreading payments to a beneficiary over a period of time
- Limiting payments to specific purposes
- Protecting your family legacy for children and grandchildren, including protection from claims by former spouses of children
- Providing for management of finances for minor children
- Reducing or avoiding federal taxes
- Preserving the estate property for young beneficiaries until they reach age 30 or older
- Providing for management of funds for a beneficiary with special needs
- Addressing inheritance concerns in a blended family that includes children from a previous marriage
- Controlling distribution of assets to a financially irresponsible beneficiary
- Protecting assets for your long-term care needs as part of Medicaid planning
- Providing for someone to manage your finances if you become incapacitated
The above list includes just some of the purposes that you can accomplish with a trust. There are other goals that a trust can accomplish as well.
You should never execute a trust document without assistance from an experienced estate planning lawyer. There are many different types of trusts, each of which accomplishes different goals. Your estate planning attorney makes certain that your trust reflects your unique wishes and goals and that your trust complies with all the complex legal requirements that apply to trusts. Creating your estate plan with assistance from a knowledgeable lawyer also prevents you from becoming a victim of an estate planning scam.
Avoiding Probate
Another important difference between a will and a trust relates to probate of the estate. In Michigan, property distributed in a will usually goes through the probate process. In addition to giving you control over property distribution, a trust can avoid probate of your estate, if the trust is properly structured, established, and funded.
Avoiding probate has benefits that are important for some individuals, such as reducing the amount of time it takes for beneficiaries to receive their inheritance and reducing the costs of estate administration. In addition, probate of a will makes the financial details of your estate publicly available, but a trust maintains the privacy of your financial information.
Deciding Between a Will and a Trust
Determining the best way to distribute the property in your estate is one of the most important estate planning goals. Many different factors are part of the decision-making process. The only right way to make that determination is to consult with an experienced estate planning attorney.
There are sound reasons why virtually every estate plan should include a will. If you don’t have a will, Michigan laws and courts make all the necessary decisions relating to your estate. Even if your estate plan includes a trust, it will likely also include a will. When an estate plan includes a trust, the role of the will is slightly different than it is in an estate plan without a trust.
Some individuals benefit from using a trust for distribution of estate property. Others do not need a trust as part of their estate plan. Your estate planning lawyer evaluates all your goals and circumstances before recommending the best structure for your estate plan.
Just as you should never try to create a trust without assistance from a lawyer, you also should never try to make an estate plan without a lawyer. An estate plan involves much more than just a will or just a trust. A will is not an estate plan, and neither is a trust. A thorough estate plan includes other essential documents. Your attorney makes certain that your estate plan addresses all the personal and financial concerns that should be part of protecting yourself and your family and preserving your assets well into the future.
Talk With Our Experienced Michigan Estate Planning Attorneys
Our attorneys at Barron, Rosenberg, Mayoras & Mayoras, P.C., provide a full range of services relating to estate planning, including wills, trusts, and other essential estate planning documents. We’ve been serving clients in Oakland County and beyond for more than 40 years. Our clients count on our commitment, experience, and credentials when they turn to us for their legal needs. Call us at 248-641-7070 or use our online form to contact our experienced estate planning attorneys.