Should I get a will or a trust? Its an age old question, and like any good legal question, all it does is lead to more questions. However, the simple answer is that in most cases you should have both.
The three main purposes for having a trust are, in no order of importance, 1.) Probate Avoidance; 2.) Control of Assets and Powers of Appointment; 3.) Estate Tax Avoidance.
Probate avoidance is important it protects privacy and reduces costs. Opening and closing a probate estate costs money in terms of filing fees, inventory fees, attorneys fees and other administrative costs. In addition, the time period to close the estate is substantially longer, often leads to disputes among family members, and the estate is now a matter of public record.
Control of assets is important because if they are properly funded in a trust then they can be distributed after payments of creditors, or as the terms of the trust may otherwise provide. Powers of appointment also play a role because the court does not have to approve a successor trustee of a trust unless there is some dispute over how the successor trustee was nominated.
Lastly, a properly funded trust or series of trusts will be vital in avoiding or minimizing federal estate tax liability. Those who have net assets exceeding a certain monetary threshold are subject to the federal estate tax.
Having a will is a catch all for any assets not funded to the trust, and a probate proceeding to recover those assets and allow them to pass to the trust is made much simpler by having a pour over will. Pour over in the sense that any assets not funded to the trust will “pour over” to the trust through the will.
However, disputes can arise at any time, and an unwillingness to settle leads to long and expensive court battles.