LITTLE ROCK, Ark. (KTHV) -- Estate planning isn't just for wealthy people. But should you have a will or trust or both?
Eric Hutchinson, president of Hutchinson Financial joins us with what you need to know.
Should you have a will or trust or both?
When preparing an estate plan, one of the strategic decisions you will have to make, with the help of your estate planning attorney, is to decide whether to have a will, a trust, or both. Here are the differences and why you might choose one over the other.
1. WILL: A will is a document that spells out your wishes about the disposition of your estate after your death. Everything you own, including real estate, personal property, bank accounts, investment accounts, retirement accounts, etc. is your estate. Everything you own must be given away or disposed of in some way after your death. Who gets what and how they get it can be spelled out to suit your wishes.
2. LIVING TRUST: A living trust can serve as a will substitute. A living trust can do everything a will can do. So what is the difference in the two?
3. DIFFERENCES BETWEEN WILLS AND TRUSTS: One important difference is in the handling of the estate after your death. A will typically needs to be handled by an estate attorney and will often involve the Probate Court to distribute your estate according to the terms of your will. This can be an expensive, time consuming process and is a very public process. The records of the Probate Court are available for public viewing. Your nosy neighbor can go to the courthouse and look at a list of your assets as disclosed to the court. Assets have to be re-registered in the name of the new owner; deeds have to be prepared to change ownership on real estate. The paperwork involved can be overwhelming. Then there are the costs. Attorney's fees and court fees can add up fast. Contrast this scenario with a living trust.
With a living trust, most or all of your assets are titled in the name of the trust. You control the trust and have the full use and benefit of the trust's assets during your lifetime. At your death, your successor trustee takes control of the assets in the trust and distributes them as you have directed. There is very little, if any, probate process. There is very little, if any, attorney's costs. It is just a smooth transition without too much fuss.
4. COMPARISON: A will is a simple, fairly low cost document to prepare and fairly expensive on the back end to administrate. A living trust is a little more cost on the front end and very little cost or fuss to administrate on the back end. Plus, a living trust can be entirely private, so a nosy neighbor has no options to look into your affairs. Will or trust? Which is right for you? You can decide, with the help of your estate planning attorney.
5. CAVEAT: Estate planning is a very specialized area of law. It is important to work with an experienced estate planning attorney, a specialist, to advise you and prepare documents for you. Your estate planning attorney can help you decide whether a will or trust or both might be right for your situation.