How Does Trust Administration Differ from Probate Administration?
When considering whether to use a trust or a will, consider how these two estate planning tools work during life and postmortem. Both are well-established tools. However, they serve different purposes.
Is a Last Will and Testament Enough for an Estate Plan?
A will is the foundation of an estate plan, used to direct the distribution of assets, name an executor overseeing the estate’s details during probate and a guardian to care for minor children.
The executor is a fiduciary responsible for a myriad of details concerning the estate. Their task begins with obtaining death certificates, submitting the will to the probate court and notifying Social Security of the person’s death. The executor is also responsible for the upkeep of any property until it is distributed to the heir and contacting financial institutions, including insurance companies and investment advisors.
Many of the tasks to be undertaken by the executor cannot happen until the court has reviewed the will, declared it valid and issued Letters Testamentary. These documents verify the executor’s authority to act on behalf of the estate.
Who is in Charge of a Trust?
A trustee is named in the trust to manage assets and carry out the trust’s directions. In a living trust, the person creating the trust is also the trustee, and secondary trustees are named in case the trustee is incapacitated or otherwise unable to act. The trust contains instructions for the trustee, outlining what they can and cannot do with the assets.
Why Would a Trust Be Preferred?
For families seeking privacy, trusts are better than wills. Once a will is submitted to probate, it becomes a public record, and anyone can read it.
The only people who can gain access to trust documents are the people who created the trust and heirs. Depending on where the trust is established, the trustee may not be legally obligated to provide a copy of the trust or information to beneficiaries.
Planning for Incapacity
A will is effective upon death and only after it has gone through probate and been validated by the court. In contrast, trusts become effective once they are created, although they must be funded to function. If the grantor is incapacitated, the trustee (or successor trustee) has control of the trust. No court intervention is needed, and assets in the trust may be used as directed by the trust’s language.
Wills and Trusts
For most people, using a last will and testament and a trust is the optimal solution. The will provides the court with the testator’s wishes for executor and guardian roles while adhering to state law regarding the distribution of assets not contained in a trust. The trust allows for a far more efficient wealth transfer and provides privacy. They should be created in tandem to ensure alignment with overall estate planning goals.
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