When is a trust appropriate?

When is a will appropriate?

People are often confused between the distinction between a will and a trust.  Often clients will ask, “When is a will appropriate?” and “When is a trust appropriate?”  These are questions that are best answered in light of an individuals’ specific situation.  For example a will might be appropriate for someone who has significant assets, but only one child.  That child can be listed as a beneficiary on all the assets and a trust may not be necessary.  However, if that specific person has most of their assets in a brokerage account in which the brokerage prefers not to rely on instructions from an agent under a power of attorney, but rather prefers when the account is significant that the assets be administered by a trustee of an irrevocable living trust.  Obviously, in that situation the lawyer would recommend the irrevocable living trust.

What exactly is a will?  A will is a list of instructions to the court of how the assets of the person who has died should be administered and distributed to the persons listed in the will.  The probate process is designed to by court order to transfer assets of the deceased person from the name of the deceased person to another named person. Contrary to popular belief, a will does not avoid the probate process, rather the will is the instructions by which the probate court administers the assets of the deceased person and distributes the assets to the new owners.

What is a trust?  A trust is a person under our legal system.  A trust owns the assets and at the time of death, the assets owned by the deceased (in the trust) can be transferred to another person without the need for probate.   The trust document specifies the transfer information.  Trusts are beneficial if a person becomes disabled.  In that situation the trust, if appropriately worded, can distribute the assets to the new owners at the death of the original owner.  Usually, the trust is created by a person and is known as the person’s revocable living trust.  If the original owner, who is usually the original trustee, becomes unable to serve as trustee the successor trustee as named in the document would become the administer of the assets in the trust.  These are popular because you avoid probate at the time of the death and also at the time someone becomes incapacitated.

Obviously, when reviewing these issues, it is important to discuss the specific matters with legal counsel.