In the estate planning decision-making process, perhaps the biggest decision is whether to select a will or a trust. While each person’s situation is different- and thus the factors guiding the decision of a will versus a trust differ vastly- one consideration is confidentiality. Unlike a will, which is available to the public once it enters probate proceedings, a trust is confidential. No one has the right to view a trust. Obviously, there are instances where the settlor (the person who made the trust) wishes to share the trust with other people or entities, the settlor is not required to do so. Many people select a trust since they have children, which allows for greater assets protection and distribution than a will. Others select a trust for tax reasons, although this is much less common now than in the past. So, if you don’t fall in one of these categories, why select a trust?
A person or family may have particular assets that they wish would not be known publicly. While it is highly unlikely that someone will go a probate court and pour over the wills going through probate, it is possible. The settlor may wish to avoid this possibility. For example, the settlor may have extensive property or particular valuable or rare assets that the settlor wishes would remain private. Alternatively, the settlor may not assets passed to beneficiaries to be publicly available. There may be unique assets, for example, that the settlor prefers be private. Alternatively, the beneficiaries may be receiving substantial assets that don’t give rise to tax consequences, but the settlor would prefer it be confidential that the beneficiaries are receiving several million dollars in the estate.
Settlors may choose a trust for pure privacy reasons. Their assets and beneficiaries are not a concern, but rather, the simple fact that a will is available to the public after death may drive the settlor to select a trust. Privacy concerns are increasing, and the settlor may simply want privacy.
Faster Access to Assets
Probate can be a slow process: at least 9 months, usually, in Michigan, assuming everything goes smoothly. A trust will allow the beneficiaries access to assets much faster, avoiding the time period involved in probating a will.
While a trust is costlier to establish, it can be loss costly upon death. Submitting a will to probate incurs filing fees and an inventory fee (essentially, a tax on the assets of the deceased). For 2019, the fee to open a probate estate (for most estates) is $175, plus the filing fee for notice to creditors is $92. On top of that is the inventory fee, which typically runs a couple hundred dollars. Thus, running a will through probate can be costly, despite the savings initially of choosing a will over a trust.
For certain individuals, other considerations may come into play. For most people who are not evaluation a trust versus a will for children or tax reasons, these are the usual considerations that come into play. To discuss whether a will or trust is best for you, or to chat about any other estate planning issue, please contact Benjamin Long of Schmidt and Long.