Part of what makes life so beautiful is that it doesn’t last forever. It’s a bittersweet reality. We work hard to contribute meaningfully to the world while we’re here, and our contribution goes on through the relationships we’ve built and the gifts we’ve given to the people and causes we care about. A good estate plan helps us preserve the value of these relationships and the support we can provide for them after we pass.
Unfortunately, however, estate planning is far from an intuitive process. But with a little foresight – and the help of a good estate planning attorney – you can make sure your estate plan uses all of the legal tools at your disposal to shape your legacy well into the future. Estate planning is complicated, and you should never attempt it alone. With that being said, it’s critical to educate yourself on the important aspects of estate planning. Wills and trusts are two of the most common legal tools in an estate planning lawyer’s toolbox, so you should consider whether either – or both – should be a part of your final arrangements.
Trust vs. Wills
The greatest distinction between a trust and a will is when the associated legal rights and responsibilities will go into effect. A will is signed, witnessed, and executed during your life, to goes into effect after your passing. It states how you want your assets to be distributed at the time of your death, and it can be revoked or amended at any time up until you pass. Because a will activates after your passing, it is primarily a tool for identifying what you want to happen once you’re gone, including who will get different portions of your assets and, in some cases, who will serve as legal guardian to care for your minor children. The State of Illinois imposes a suite of requirements on what constitutes a validly-executed will in the Illinois Probate Act.
trust, on the other hand, allows you or someone you designate to manage your property both during and after your lifetime. In Illinois, trusts are regulated by the Trusts and Trustees Act, and there are many reasons why people choose to form trusts.
Why Choose a Trust Over a Will
Trusts and wills each have unique costs and benefits. In general, a trust is more costly to establish in the short-term than a will, but a will ends up more expensive in the long run. This points to one of a trust’s major benefits—the ability to avoid probate. Whereas wills are required to move through an often difficult and expensive court process before any funds are released, assets in a trust are released as soon as whatever triggering event you decide upon. This event may be your death, but it can also be your child’s eighteenth birthday, the sale of a commonly-owned property, or nearly any other event.
Flexibility isn’t the only potential benefit of forming a trust. While assets distributed via a will are fair game for creditors, a trust allows you to protect your inheritors’ assets from garnishment for debts incurred through a divorce, lawsuit, business loss, or bankruptcy. Likewise, for beneficiaries receiving government benefits, a trust can ensure they are still able to qualify for governmental benefits such as disability despite the additional income.
Trusts can also help legally reduce estate taxes, allow your trustee to administer assets directly to minor beneficiaries on conditions of your choosing. This is unlike a will, which releases your assets in full upon your death or, if your beneficiary is a child, when he or she reaches adulthood. In this way, trusts allow you to tailor distribution of your assets in whatever way that is best aligned with your vision, including by limiting the distribution of your funds to use for particular purposes.
Trusts have many potential benefits over wills, but wills are a critical part of nearly every estate plan. Regardless of whether you use a trust or not, a will is also a necessary piece of ensuring care for young children in the event of your untimely death. The great benefit of a will is that it is more straight forward and less complicated than a trust. If you have very simple plans for your estate, a straightforward will may be more desirable than an elaborate trust.
Don’t Be Fooled! Wills Can Be Complicated Too
Many people are tempted into DIY wills, but the estate planning process is far too complicated to attempt without expert help. The basic steps for creating a will include making the big decisions—deciding what property you will include, who will inherit your assets, who will serve as executor to handle your estate, who will serve as a guardian for your minor children, and who will help administer your children’s property. It is at the execution stage that the process becomes messier.
First, the executor must file a probate claim. In probate court, a judge will determine that your will is valid, identify and inventory your property, have it appraised, pay any outstanding debts and taxes, and finally, distribute the remaining property as your will requires. This process can take between six months to a year, if not longer. This ties up your assets and may require a great deal of paperwork and court appearances by your attorney.
An alarming 60 percent of Americans do not have a formal plan for their assets. Despite the discomfort and potential hassle of executing a will or establishing a trust, the effort is well worth it. Indeed, if you don’t decide how you want your property to be divvied up after your death, the rules of intestacy and the probate court will. This can often be a very costly and arduous process for any loved ones or beneficiaries who are left scrambling in your wake.
Trusts and wills are both effective mechanisms to influence how your estate is handled after death. But each also has unique costs and benefits that will aid you differently, depending on your financial, family, and unique lifestyle landscape. Whatever tool you choose to employ, be sure to get the assistance of a good estate planning attorney in your area. M&A Law Firm offers the best estate planning services in the Chicago area, so don’t hesitate to reach out with any of your estate planning needs.