Two of the best-known estate planning documents are wills and trusts. However, there is confusion about which is “best.” These documents serve different purposes; the important thing is to be sure that they work together to achieve the overall goals of the estate plan.
What is a Will Used For?
Most people understand a last will and testament is used to distribute a decedent’s assets after death. However, the last will serves several other functions. It names an executor, the person in charge of managing the estate. This is a significant role, requiring the ability to handle finances, engage with many government agencies (Social Security, IRS, Veterans Administration, etc.), navigate family dynamics and distribute estate assets.
If there is no will, the court will name an executor, known in that context as an administrator, who may not be a family member. Assets are then distributed according to the state's laws, instead of as the decedent intended.
For parents with minor children, the last will nominates a guardian to raise minor children in the event of both parent’s death. If there is no last will, or if the last will fails to name a guardian, the court will decide who should raise the child or children. In many cases, the family may not have an opportunity to be involved in these decisions.
After the individual’s death, the will is submitted to the court in a process known as probate. This is a legal proceeding where the last will is validated, and the court approves the executor. If the last will has not been prepared according to the laws of the state where the decedent lived, it may be ruled invalid, and then the court proceeds as if there was no last will.
How Does a Trust Work?
Unlike last wills, trusts do not go through the probate process, which is one of their many advantages. The trust owns assets titled in the trust name, and such assets are not part of the estate subject to probate. The language of the trust is used to direct the person who manages the trust—the trustee—to do exactly what the grantor—the person who establishes the estate—wants with the assets owned by the trust.
Trusts can be used to distribute funds to beneficiaries based on achieving certain life milestones, like graduating from college or buying a home. Trusts are also used to reward certain behaviors, like maintaining sobriety or being employed for a certain length of time. Trusts may not impose illegal restrictions on beneficiaries. However, they can be used to encourage productive lifestyles. Spendthrift trusts are designed to limit the amount of assets for beneficiaries likely to use their inheritance unwisely.
Trusts are also used in blended families to ensure that biological children are not unwittingly disinherited. There are trusts to provide support for a second spouse, for instance, where the balance of the assets in the trust is distributed to the biological children after the first parent dies.
Wills and trusts are ideally created to complement each other, passing wealth onto the next generation, minimizing tax liabilities, avoiding delays in asset distribution and ensuring that the decedent’s wishes are followed. At Vick Law, P.C., we understand the importance of these vital documents in safeguarding your legacy and ensuring your wishes are fulfilled. Whether it's nominating guardians for minor children or establishing trusts to preserve assets for future generations, our firm is dedicated to guiding you through every step of the estate planning process. To learn more about how wills and trusts can work together harmoniously to achieve your estate planning goals, book a call with us today. With Vick Law, P.C. by your side, you can rest assured that your legacy is in capable hands.
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