Is a Will Enough to Fulfill Your Estate Planning Needs?

The adage, “where there’s a will, there’s a way” holds true for many things. But when we’re talking about a will in the sense of a legal document, it has its limitations. So how do you know if a will is sufficient for your estate planning needs? Ask yourself these questions: 

1. Do you need to designate who would care for minor children? 

You can use a will to designate who would care for a minor child in the event of your passing. You can even designate a separate person to manage their financial care. For this purpose, a will is enough. However, if you want to specify how the child should be raised—such as preferences for religion or education—you’ll need a trust.  

2. Do you wish to specify distribution schedules? 

A will can specify who will receive your assets when you pass away, but it won’t control the timing and cadence of distributions, or how the inheritance is handled. If that’s not a concern, a will could be fine. But if you’d like more control, you’ll need a trust. 

With a trust, you can space out distributions so your beneficiaries won’t receive it all at once. Or you can specify that a distribution happen at a specific age or once certain conditions are met. In some cases, you may also specify that the inheritance pass in trust to a second generation—say a grandchild—should something happen to the original beneficiary. These are just a few examples of how a trust can provide a greater measure of control and customization. 

3. Are you hoping to avoid or reduce estate taxes? 

If so, a will won’t do the trick. We all want to maximize what we’re able to provide our heirs. Yet, unfortunately, many families underestimate just how much federal and state taxes can eat into the inheritance they leave behind. If this is a concern for you, there are certain trusts that can reduce or eliminate your tax burden and that of your heirs. Among the options are life insurance trusts and asset protection trusts. More on those here. 

4. Do you want to avoid probate? 

You might have heard that wills can avoid probate, but that’s actually not the case. All wills go through probate. If you really want to avoid probate, you’ll need—you guessed it—a trust.  

Why would you want to avoid probate? It’s expensive, which can cut into the inheritance your loved ones receive. And it can be time consuming, which means your loved ones could experience a delay in receiving what you’ve left them. Further, it’s a public process, where your will must be validated by a judge. People who were not included in your will, but feel they should have been, can contest your wishes. A trust can help you avoid this by making it possible for assets to pass to your heirs privately outside of probate. 

5. Do you have jointly owned property or property with designated beneficiaries? 

There are certain classes of property a will can’t address. One of those is jointly owned property, which is anything that’s owned equally by two or more parties. In this situation, property automatically passes to the other surviving owner, so it cannot be left to someone else in your will. 

Another class of property that you can’t put in a will is anything that already has a beneficiary clearly stated, such as retirement plans, insurance policies, or stocks and bonds set to transfer to someone else upon your death. 

Does that mean for these classes of assets your options for avoiding probate, taxes, and controlling distributions are limited? Not necessarily. If the asset is placed in trust, you could still enjoy the benefits mentioned above.  

If your answers to these questions have you wondering if you might need a trust, we have some resources to help. In our Estate Planning 101 series, we walk you through some of the scenarios where a trust makes sense and explain why. We also recommend you check out our Cheat Sheet to Understanding Trusts in Retirement, which breaks down some of the most common terms you’ll hear and what various types of trusts can and can’t do.  

Finally, while we know the world of trusts can seem complicated, the right attorney can make it much easier to navigate. If you think you may need a trust, or have questions about creating one, we’d be happy to help. Schedule a complimentary phone consultation with one of our attorneys today.