Is seems like the most common question I receive as a Grand Rapids, Mi estate planning attorney – what is the difference between wills and trusts? Does my family need a will or a trust?
Well, as you might expect, the answer to the second question is different for every family. Why? Because no two families (or individuals) are the same. There are plenty of attorneys out there who will look at your family’s assets and tell you what you should have. That approach does not fit the way I work with client families. I think it is best to share with you some of the advantages and disadvantages of wills and trusts, and let you determine what is best for your family based on who you are and what’s important to you.
Here are some examples of how wills and trusts differ on a few key considerations:
- Privacy:Wills – with a Will there is no privacy. Documents and proceedings after death are public record. Trusts – administering your trust after death can be done privately, unless court intervention is required, which is usually a result of poor drafting, lack of funding, or loss of Trustee.
- Disability Planning:Wills – no provisions for physical or mental disability. The disabled person is subject to the court process for guardianship and/or conservatorship. You will need to rely solely on your power of attorney and keep it updated over the years. A power of attorney can provide that disability be determined privately by family members and friends. Trusts – Handles assets upon disability without court intervention. Need a power of attorney for non-trust assets. A trust can provide that disability be determined privately by family members and friends.
- Creditor/Predator Protection:Wills – None while alive. Testamentary trusts may provide some protection. Creditors have only a specified amount of time to present claims after death or they are forever barred. Trusts – A typical living trust designed to avoid probate does not provide creditor protection while you are alive, however it can provide protection for your beneficiaries after your death. There are special trusts that can be created that provide you with asset protection during your life. Creditors have only a specified amount of time to present claims after death or they are forever barred. Trusts which become irrevocable at death can give protection.
- Effort Required: Wills – Less effort now unless you require tax planning and asset protection for your heirs, but typically more work for your heirs after disability or death. Trusts – More effort now to properly design the trust to accomplish all of your goals upon disability and after death and to coordinate assets with it, but typically less work for your heirs after disability or death if done correctly.
- Cost Now:Wills – less. Trusts – more.
- Costs to Amend:Wills and Trusts – similar.
- Cost Later: Wills – average all-inclusive cost of a probate in Michigan tends to be around 3-5% of the value of the estate. Trusts – No probate fees if the trust has been fully funded and properly maintained and trust administration fees tend to be less than estate administration fees.
Do you question whether your estate plan fits your families goals and wishes? Give us a call. We are happy to help make sure your plan works for you and your family! Give us a call at (616) 965-2221.