Should I Create a Will or Trust-Based Estate Plan?

When creating an estate plan, two of the most common tools used are wills and trusts. Both play important roles in managing and distributing your assets, but they serve different purposes and operate in distinct ways.

At Johnson Legal, PLLC in Wilmington, North Carolina, we want to help clarify these key differences to help you make informed decisions for your estate planning.

What is a Will?

A will, also known as a “last will and testament,” is a legal document that outlines how you want your assets distributed after your death. It allows you to specify who should inherit your property, how debts should be paid, and who will serve as the guardian for your minor children, if applicable.

Key Features of a Will:

1. Effective Upon Death: A will only becomes active after you pass away, meaning it has no legal authority while you are alive.
2. Probate Process: In North Carolina, a will must go through probate, a legal process where the court verifies the validity of the will and oversees the distribution of assets. Probate can sometimes be lengthy and costly, depending on the complexity of the estate.
3. Naming Guardians: A will is the only estate planning tool that allows you to name a guardian for your minor children.
4. Flexibility: Wills can be amended or revoked at any time during your life, as long as you are of sound mind.
5. Public Record: Once a will goes through probate, it becomes part of the public record, meaning anyone can access it.

While a will is a straightforward way to handle asset distribution and guardianship, it doesn’t offer any assistance during your lifetime, such as if you become incapacitated.

What is a Trust?

A trust is a legal arrangement where you (the “grantor”) transfer ownership of your assets to a “trustee,” who manages those assets for the benefit of your beneficiaries. Trusts can take effect either during your lifetime or after your death, depending on the type of trust you create.

Key Features of a Trust:

1. Avoids Probate: One of the main advantages of a trust is that it bypasses the probate process. This allows your assets to be distributed quickly and privately without court involvement.
2. Lifetime Benefits: Trusts can be structured to provide financial support while you are still alive. For example, if you become incapacitated, your trustee can manage your assets on your behalf.
3. Control Over Distribution: With a trust, you have more control over how and when your assets are distributed. You can specify that assets be distributed in increments or set conditions for beneficiaries to meet before receiving their inheritance.
4. Variety of Trusts: There are several types of trusts available, including:
   1. Revocable Trusts: These can be changed or revoked during your lifetime.
   2. Irrevocable Trusts: Once established, these cannot be modified or revoked.
5. Privacy: Unlike a will, a trust is not a public document, which means your estate details remain private.
6. Costs: Trusts can be more expensive to set up and maintain compared to a will. However, they often save money in the long run by avoiding probate fees and delays.

Key Differences Between Wills and Trusts

Understanding the primary differences between wills and trusts will help you decide which option best suits your estate planning needs.

1. Probate Process

• A will must go through probate, which can delay asset distribution and incur court fees.
• A trust avoids probate, allowing for faster and more private asset distribution.

2. When They Take Effect

• A will only becomes effective after your death.
• A trust can take effect during your lifetime (especially if you become incapacitated) or after your death.

3. Privacy

• Wills are subject to public record after probate.
• Trusts remain private, as they do not go through the court system.

4. Flexibility

• Wills are flexible and can be changed during your lifetime.
• Revocable trusts offer flexibility, while irrevocable trusts do not.

5. Incapacity Planning

• A will does not help manage your affairs if you become incapacitated.
• A trust can be designed to manage your assets if you are unable to do so.

6. Guardianship

• A will allows you to name a guardian for your minor children.
• A trust does not address guardianship but can provide financial support for minor children.

Which is Right for You? A Will or Trust

Every individual’s situation is unique. Deciding between a will and a trust depends on your specific needs, financial situation, and long-term goals. In some cases, both may be necessary to create a comprehensive estate plan.

Wills May Be Ideal If:

• Your estate is relatively simple.
• You have minor children and need to name a guardian.
• You want to ensure your wishes are carried out after your death, but you’re not concerned about avoiding probate.

Trusts May Be Ideal If:

• You want to avoid probate and ensure a quick, private distribution of assets.
• You want to control how your assets are managed and distributed during your life and after death.
• You are planning for incapacity and want to make sure your finances are managed without court involvement.
• You have complex financial situations or large estates that require more intricate management.

Let Us Help You Create an Estate Plan Tailored to Your Needs and Goals

Both wills and trusts are valuable tools in estate planning, but they serve different purposes. A will primarily addresses how your assets will be distributed after your death, while a trust can provide benefits both during your lifetime and afterward. Consulting with an estate planning lawyer at Johnson Legal, PLLC can help you determine which option (or combination of both) is the best fit for you and your family.

Our team is here to guide you through these decisions and ensure that your estate plan meets your needs and provides peace of mind. Whether you’re creating a simple will or considering a more detailed trust, we’re ready to assist you in planning for the future.

For personalized guidance, contact Johnson Legal, PLLC today to speak with our estate planning professionals in Wilmington, North Carolina. We are here to help you make the best decisions for your estate, your family, and your future.