There are many differences between a will and a trust. In fact, it’s day and night and apples and oranges. One of the main differences is how much protection you have from the four-headed monster I have explained in previous videos and articles. This consists of probate court, estate taxes, financial creditors and predators, and long-term care costs.
A will is your admission ticket to probate court, which is the dreaded first-headed monster. Generally, a will is more simplistic in what it provides. For example, all it may say is who’s in charge and who gets your stuff after you’re gone. This makes probate court required in order to distribute everything properly. So, although it is better than not having any direction at all, your loved ones will need to visit a probate attorney’s office to ensure everything is done correctly in court.
Once there, the probate attorney will begin charging at the firm’s hourly rate, which could run from $300-$500 an hour, depending on where you live and what the community legal rates are in that area. The charges will continue until the probate attorney completes the estate’s probate. Your loved ones must pay these costs upfront to get your will processed.
By using a trust, you can most likely avoid probate altogether. A trust does not need to be processed by a probate court. It not only details who is in charge and where assets should go, like a will, but it goes beyond that in how much control you can maintain over your assets while you are alive and even after you are gone. This leads to nominal costs to you and your family when the trust needs to be executed.
If there is no proper planning and you have a taxable estate, then your estate may have to pay taxes once you pass away. Unfortunately, a will does not provide any tax planning. However, many options and ways to complete proper tax planning in a trust exist. This allows your assets to be wholly passed on to whomever you wish, versus some of them being used to pay taxes.
Next, a will does not provide asset protection from the third-headed monster consisting of financial creditors and predators. The language of a trust can ensure that your assets are safe and once again passed down correctly to the beneficiaries you want them to go to. Since you have more control over your assets, you can even dictate how and when the assets go to your heirs. A will allows for very little control and protection.
Lastly, a will cannot help with long-term care planning. A will only comes into play once you have passed away. However, a trust can be created and used while you are alive. By creating a trust and placing your assets within the trust instead of remaining in your own name, it is possible to guard your assets against the $15,000 per month costs that arise with long-term care if that becomes necessary. There are specific requirements and time limitations for this, so it is vital to be aware of them when you create your trust.
Essentially, you need a trust to protect against the four-headed monster. A will typically costs less in the beginning but much more once you have passed away. A $500 will can provide your loved ones about $500 worth of protection, but a trust-centered plan is like a will on steroids. A properly drafted trust adequately funded with your assets will slay the metaphorical four-headed beast. On the other hand, a will is typically woefully insufficient to adequately protect what you worked hard for and exposes you and your loved ones to not just one but potentially all four aspects of the four-headed monster.
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