If you decide to plan your estate using a will, your assets (other than jointly owned assets, insurance and retirement plans) will go through probate. Probate is the legal process in which a state court supervises the administration of the estate and the distribution of assets. In a probate, the deceased person’s will is filed with the court. The will becomes a public record which can be accessed by the general public. Probate can be expensive and time consuming, but the procedure varies from state to state. If you own a vacation home in another state, a probate will also be required in that state.

A trust will avoid probate on all of the assets owned by the trust. A trust is a legal relationship in which you transfer property to a trustee for the benefit of one or more beneficiaries. In most cases, the individual who creates the trust also acts as trustee. The trust document details the duration of the trust, the powers and duties given to the trustee, the time and manner of the distribution of the trust assets and the rights of the beneficiaries. The trust is then administered by and for the benefit of the individual who created the trust. This type of trust is “revocable” which means the individual who created the trust can amend or terminate the trust at any time.

A trust has many advantages over a will. Most importantly, a trust provides you with greater flexibility in planning your estate since a trust can be set up to meet your unique objectives. A trust is much more difficult to challenge than a will and provides you and your family with greater privacy since a trust does not become a public record.

Your trust can specify how assets are distributed and in what manner. For example, a trust can be set up so that your spouse has the use of your assets during his or her lifetime but upon death, the funds are distributed to persons or charities chosen by you. If you plan to leave money to minor children, a trust can be drafted to allow for distributions on behalf of minors for certain expenses, such as education, support and health care costs, while keeping the principal in trust until the beneficiary reaches an age when the money can be distributed outright.

A trust allows the creator of the trust to plan for disability without court involvement. A successor trustee is named who can act in place of the creator of the trust if he or she becomes disabled and is unable to manage his or her affairs. A will, however, does not take effect until death. Without a trust, a guardian must be appointed by the court to administer the assets for the benefit of the disabled person. Guardianship requires court supervision and approval for all expenditures made on behalf of the disabled person. Procedures for appointing a guardian vary from state to state.

A popular misconception is that you don’t need a will if you have all of your assets in joint tenancy or in a pay-on-death account so that the balance of the account is paid to the co-owner or designated beneficiary upon the account owner’s death. These assets pass directly to the co-owner or named beneficiary upon death. There is no probate required on the death of the first owner but a probate will take place on the death of the second owner. One significant drawback to this option is that the surviving spouse has the power to control the disposition of all of the couple’s assets. The favorite charity or family of the first spouse to die may end up receiving nothing.

Jeffrey C. Rambach
918-591-5202
jrambach@dsda.com