A will may not be the best way to protect and care for your family. In his book, Living Trusts for Everyone: Why a Will is Not the Way to Avoid Probate, Protect Heirs, and Settle Estates, Ronald Farrington Sharp clarifies a common misconception around trusts: that it’s not only for a limited, wealthy segment of the population, and for many Americans a trust may better fit their needs than a will. A trust is similar to a will in that it’s also just a written document, but is its own legal entity that has the ability to own assets.
So, what are the benefits of a trust?
A properly drafted trust avoids probate
The probate process is a lengthy and expensive process. While wills may be cheaper up front, the costs after a death of a loved one add up fast. When someone dies leaving a will, the court begins a process to “prove” its validity. During this public process, anyone can challenge the contents of the will, adding layers of potential complexity and delay to the matter. The entire probate process can take months or even years of work, possible attorney involvement, and court oversight to complete.
On the other hand, assets in a living trust avoid probate. People could still challenge a trust, but it’s much rarer. The trust appoints a trustee, who at the death or disability of the grantor (the creator of the trust), assumes fiduciary responsibility, settles the estate, and distributes the assets to beneficiaries. Aside from specific circumstances the book discusses that may necessitate going to an attorney or a court, the entire process can be carried out by the trustee, avoiding the time and expenses associated with probate.
A trust has flexible provisions
With a will, children usually receive their inheritance as a lump sum, and is held in a court-supervised conservatorship account. While a conservator has access to the account, spending decisions have to be approved by a judge, and in most states they have to prepare an annual report accounting for income and expenses. While oversight is beneficial in some cases, the complex and time-consuming process can be avoided through a trust.
With a trust, grantors have the flexibility to specify when and how beneficiaries receive trust assets. They can add conditions (the book gives examples of parents using “upon marriage…” or “upon graduation from university…” as conditions), and allot certain percentages to be received upon reaching a certain age. Many individuals and families benefit from this type of flexibility. The trustee can also spend trust money for a minor’s education, health, and living expenses until they receive assets at the time and conditions specified by grantors, without needing judge approval.
Along the same lines, the second chapter in the book discusses other categories of people who will especially benefit from a trust. These include families with disabled beneficiaries or blended families. Sharp’s overall point is that a trust can contain flexible provisions to meet your exact intentions. A trust can also reduce or eliminate estate and inheritance taxes.
Other considerations
Subsequent chapters provide advice on other estate planning-related topics. These include finding a good estate-planning attorney, funding your trust, and circumstances where a trust may not be necessary. The last chapter of the book is especially useful to those named as trustees. It provides practical guidance and a checklist of to-do items after the death of a grantor, from obtaining tax identification numbers to paying debts. Rules and laws can vary depending on where you live, but much of the process overall remains the same. Most work needed to be done after the death of a grantor is not actually legal work, but clerical work. This means that a well-informed trustee can avoid legal fees and settle assets relatively quickly. There’s also administration forms in the appendix provided for educational purposes, so readers can familiarize themselves with the formats.
You can also learn about the other benefits of estate planning, such as incapacity planning and privacy protection, by reviewing another recent article of ours on the shortcomings of will-based plans over living trusts.
Readers of all backgrounds will benefit from this book. In under 200 pages, Sharp provides the average reader unfamiliar with estate planning guidance on maximizing protection for loved ones.