When Burt Reynolds died in September of 2018, he left his only son out of his Will. But this wasn’t done by accident or even out of malice- it was a calculated move. Reynolds had left his son out of his Will because he had provided for him in his Trust.
So, what does that mean? Is that something swanky only the rich and famous can afford, or is a Trust available to us regular folk, too? Read on to find out…
We’ve covered what a Last Will and Testament is in great detail in past blogs. But to give a quick recap, it boils down to this: A Will is a document that outlines your wishes regarding the distribution of your personal finances and important assets after your passing. A Will can also stipulate who should assume care of any minor children you may have at the time of your death and names a Personal Representative (PR) to carry out the probate process.
What’s a Trust, then?
A Trust is a separate legal entity that a person sets up to manage his or her assets. Once assets are placed inside a Trust, they fall under the care of a Trustee, or person designated to manage the contents of the Trust. The Trustee determines how to properly invest the assets and distributes them when the Trust terminates. Many of the rich and famous will utilize a Trust rather than a Will for their estate planning purposes for a myriad of reasons including: tax planning, probate avoidance and asset management.
There are two basic types of Trusts. A Living Trust or a Revocable Trust is just that…living. The owner of a Living Trust can change the terms, remove and add beneficiaries and make any other modifications as to how the assets within the Trust are managed at any time prior to his or her death. An Irrevocable Trust on the other hand, is not nearly as flexible. In fact, it’s not flexible at all. The terms of an Irrevocable Trust are set the minute the agreement is signed.
While it may seem like a no-brainer to spring for the Living Trust, the one with more flexibility, a Revocable Trust actually has a few disadvantages that one should consider prior to making any decisions. Assets within a Revocable Trust are subject to liquidation if the owner is sued and an outstanding debt needs to be satisfied. Additionally, assets of a Living Trust are subject to state and federal estate taxes when the owner passes away.
Another type of Trust is a Special Needs Trust which gets established to manage the assets for someone who is not capable of managing them for themselves and/or to provide for their care.
How do they compare?
Will and Trusts are independently useful in many different circumstances. Both options are available to you in your estate planning, but you should weigh the differences carefully to ensure you make the right decisions. Seeking the assistance of an accountant can be instrumental when trying to decide if establishing a Trust is right for you.
From a high-level point-of-view, a Will and a Trust both allow you the opportunity to name beneficiaries of your assets. Some people utilize a Trust to avoid the Probate process, but Trusts can be fairly complicated to establish. And you can’t stipulate who becomes guardian of your minor children in a Trust, nor can you name an executor of your estate.
To accurately gauge which option is best for you, it may be worth your while to sit down with an experienced Estate Planning & Probate attorney. Your attorney can help you weigh all the benefits and costs as they apply specifically to your circumstances. In general, everyone can benefit from having a Will, but not everyone needs a Trust. If the situation calls for it, after making a Trust, you should also make a Will that reflects the existence of the Trust and allows you to name an executor of your estate and guardians for your minor children.
We’re here if you need help!
As always, the Estate Planning & Probate attorneys at Ferrante & Dill, LLC are here to answer your questions and assist you with your estate planning needs. Don’t hesitate to give them a call at (410) 535-6100 or send an email to firstname.lastname@example.org.