One of the most frequent questions clients ask me is, “What is the difference between a Will and a Trust?” I often start by telling them the similarities between the two. Both a Will and a Trust do the following:
- Appoint a fiduciary (Trustee, executor, personal representative) to gather your assets upon your death and distribute them to beneficiaries.
- Name the beneficiaries who will receive your assets upon your death
When I refer to assets, I am referring to probate assets. Probate assets are assets which have no method of passing to another person upon your death other than the Probate process. This includes the following:
- Individually owned real estate interests
- Individually owned bank accounts
- Cash or the contents of safe deposit boxes
- Individually owned stock accounts or investment accounts that do not name transfer on death beneficiaries
Probate is also required when any of the above assets are owned jointly, but both owners die in a common event such as an accident, or one party passes away and the survivor does not change how the assets are held and then later passes away.
The primary difference between those who die with assets in Trust, and those who die with only a Will boils down to the ability of your fiduciary to receive your assets and distribute them to beneficiary. A Will has no legal validity until it is submitted to Probate court for approval. Your fiduciary cannot take the Will to your bank and show the bank manager that he is named Executor or Personal Representative, and gain access to funds in order to distribute them. The bank manager will kindly tell them to submit the Will to the Probate court and begin the Probate process.
What is the Probate court and how bad is the Probate process? The Probate and Family Court is often referred to as ‘divorce court.’ At the Probate and Family Court, the same judges hear both Probate and Divorce matters. The same delays and expenses that everyone associates with divorce matters also apply to the Probate process. Probate matters can often become as contentious as divorce matters, pitting family members against each other fighting over the division of assets. Even when conflict is avoided, the Probate process causes unnecessary expense and substantial delays in distributing your hard earned and hard saved assets to your rightful beneficiaries. Mandatory waiting periods, backlogged courts, attorneys fees, filing fees, publication fees, license fees for the sale of real estate, and accounting fees can all take a toll on beneficiaries, and on your appointed fiduciary. Those with Probate assets—especially real estate—in multiple states have it especially difficult as Probate actions will have to be filed in each different state where property is owned.
Assets held in Trust, on the other hand, bypass the Probate process. You’ve heard the phrase, “you can take that to the bank.” The successor Trustee you appoint can literally take your Trust to the bank, along with a death certificate. Then, if your bank account is held in Trust, the Trustee can access and distribute the funds without any Probate court involvement. If your real estate interests are held in Trust, your Trustee can take possession of the properties immediately, collect rents, pay expenses with other Trust assets, and begin the sale process without any Probate court involvement. Your Trustee can hold and manage Trust assets for the benefit of beneficiaries for many years, until beneficiaries reach a certain age, all without the Probate court being involved. Trusts are also much, much more difficult to challenge than Wills, and offer families more privacy than Wills and the Probate process. Probate files are public and contain information such as beneficiaries’ names, addresses, phone numbers, and even can show exactly how much money each beneficiary receives. There are countless other advantages to Trusts, but those are some of the primary concerns.
Clients often ask why their Trust plan would still include a Will. Even a plan that avoids Probate using a Trust includes something called a “pour-over will,” which states that all assets pass to your Trust. The reason for the pour-over will is to make sure that, in the event a client acquires new assets and forgets to transfer them into their Trust, those assets will still be distributed in accordance with the terms of their Trust. In cases where wrongful death occurs, such as a person passing away in a car accident that was someone else’s fault, the Estate of the deceased must bring the lawsuit, and the pour-over will ensures that any lawsuit proceeds will pass to the deceased person’s Trust. A Will is also needed to appoint a guardian for any minor children of the deceased.
So, the question is not, “do I need a Will OR a Trust,” the question is whether to have ONLY a Will, by itself, or to have a Trust IN ADDITION to a Will. If keeping your assets and your loved ones out probate court is important to you, the easy answer is an estate plan that includes a Trust to keep your assets out of Probate. I do not just draft estate plans, I also file Probate actions for those whose deceased loved ones only had a Will—or no Will at all. After many years I can confidently say that I have never encountered a Probate client who did not wish that they could have avoided Probate court entirely.
While online searches and word of mouth can often make setting up a Trust seem overly complicated, it can be easier than you think. The first step is to simply schedule a free initial consultation to review and discuss your options. At your meeting, I will gather the necessary information to inform you of your options, explain the pros and cons of different estate planning documents, and explain how assets get transferred so that your Trust owns them. There are no long questionnaires to fill out, and if you do decide to move forward with an estate plan, there is a fixed fee structure with no hidden fees or hourly charges. You do not need an exhaustive list of assets with exact balances, or to know exactly who you want to appoint as a Trustee or guardian, or exactly how you want your assets divided upon your death. Our conversation during your consultation can help you to answer these and other questions. My goal is to make the process as efficient and as practical as possible.
That being said, if a Trust seems too daunting at this time, a client should still engage an attorney to draft a basic plan with a Will, Power of Attorney, and Health Care Proxy. Everyone can benefit from having these basic documents in place.
You can contact Attorney Scott A. Santos, Esq., at (978)-501-6225, as well as by email - attorneysantos@gmail.com to set up your FREE consultation today. Initial consultations can be held via telephone or ZOOM, as well as in-person at multiple office locations throughout Massachusetts, including your usual VL Wealth Management office location, whichever is more convenient.