Do you need a will? Do you need a trust? What the heck is a trust? Most clients I meet with know they need a will. Most have heard of a trust. But most cannot really define a trust or define why a trust is or is not appropriate for their specific needs. So what is the difference?
A will specifies who your family is, who you want to leave your assets to when you die, how you want to leave those assets, and it identifies an executor who will help take care of the your affairs after death. A will is also where you nominate a potential guardian for minor children.
A will only goes into effect after you die. It has no legal effect during your lifetime. Further, a will does not avoid probate court. Probate is the legal process through which the probate court sees that, when you die, your debts are paid and your assets are distributed according to your will. If you do not have a valid will, your assets are distributed according to Ohio law.
Is probate bad? Not necessarily, but there are drawbacks:
- Probate can be expensive. Legal fees, executor fees, appraisal fees, and other costs must be paid before your assets can be distributed to your heirs.
- Probate takes time. It can often take between nine months to two years to go through the probate process. Nothing can be distributed or sold without court and/or executor approval.
- Probate records are public records. In Hamilton County, all probate records are available on-line here: www.probatect.org/court-records/court-record-search. Probate is a public process and anyone can see what you owned, whom you owed, who will receive your assets, and when they will receive them.
A trust, on the other hand, is more like a private contract. A trust goes into effect immediately upon execution. Like a will, a trust specifies who your family is, who you want to leave your assets to and how you want to distribute your assets. Unlike a will, a living trust can avoid probate at death, control all of your assets, and prevent the court from controlling your assets if you become incapacitated.
A trust avoids probate only to the extent that it is “funded.” When you set up the trust, you transfer your assets from your name to the name of your trust, which you control. When the trust owns your assets, there is nothing for the courts to control when you die or become incapacitated. You retain full control of your assets.
A trust involves three parties:
- Grantor. This is the maker of the trust. It can be an individual or a couple can create a joint trust.
- Trustee. The trustee controls the assets in the trust. The Grantor is typically the initial trustee. For a couple, both spouses are usually co-trustee. Upon the death or incapacity of the initial trustee, a successor trustee takes over and will then follow the written instructions set forth in the trust.
- Beneficiaries. This is simply who receives your assets. If you have minor children, you can stage distributions over several years so that your kids do not receive all of your assets at age 18 or 21.
If you create a living trust, you still need a will. A will serves as a safety net if you forget to put an asset into the trust. If you have minor children, you still have to name the guardian in the will as well.
Just some of the benefits of a living trust include:
- Avoids probate at death.
- Brings all of your assets together in one plan.
- Provides maximum privacy.
- Quicker distribution of assets to beneficiaries.
- Assets remain in trust until you want your beneficiaries to inherit.
- Can be changed or cancelled at any time.
- Peace of mind.
Please call or email me to set up a time to discuss a plan that is right for your family. It is exceptionally easy to put off drafting a will or trust for another time. But I will make it as painless and straight forward as possible.