fbpx

Do I need a Will or a Trust?

Mary Hilger 03/11/2019

Should I have a will- or a trust-based estate plan? We get that question a lot from clients. There are pros and cons to both, but we wanted to give a brief explanation of the main differences between these two major estate plan options.

Will

A “Last Will and Testament” can be a useful document. It allows you to appoint a personal representative, name beneficiaries, and name the guardians or conservators for your minor children.

However, there are many downsides to a simple “Last Will and Testament.” One of the major pitfalls is the necessity to go through Probate Court with a will. Probate Court is a legal process where a judge will determine whether or not your will is legally valid. This also provides the necessary documents your Personal Representative will need to administer your estate. In Michigan, Probate Court usually costs between 3-8%* of your net worth.

Another issue we see with a will-based estate plan is a lack of privacy. When your Personal Representative begins the process to validate your will, they must provide the judge with a copy of your will. So, along with having to pay court and attorney fees, your Last Will and Testament will be presented to the court and eventually made into a public record, meaning anyone who wants to go to the courthouse can ask to see a copy of the court documents, including your will.

A will is a compass pointing to the courthouse.

Trust

There is a common misconception that you need to be wealthy to require a trust, but actually, a trust can be a very useful tool to make sure you are leaving your family a legacy, not a mess. Though a trust may cost you more right away, just think of the money you will be saving by avoiding probate.

With a trust you can name a person or entity to be your successor trustee, this person will handle the administration of your trust. Like a will, a trust allows you to name beneficiaries of your estate, but unlike a will, you are able to include more restrictions and distribution rules for your beneficiary.

If a trust is funded correctly (that means making sure your trust either owns your assets or assets will be transferred to the trust upon your death) your family and successor trustee will not need to go through probate court, saving time and money. Another critical objective when using a trust-based estate plan is avoiding probate court if you become mentally incapacitated. Typically, you have to go to probate court to have a guardian appointed to a family member if they have become mentally incapacitated. However, with a trust, you may be able to add provisions to ensure your mental capacity is determined outside of the court.

If you want to be in control and make this a smooth process for your loved ones, you should use a trust-based estate plan.

* When we reference 3-8% for the cost of probate court, that is an estimate for the cost of an informal, uncontested proceeding.

Thacker Sleight

grand rapids office  •  616 888 3810
601 5th street nw, suite 210
grand rapids michigan 49504

grand haven office  •  616 888 3810

saugatuck office  •  269 857 9120

Sign up for our newsletter

[

]