Considering your estate plan is a necessity that may feel a bit overwhelming. Whether you need a will or a trust prepared for you and your family, or you’re executing the estate of a loved one, Skufca Law’s Estate Planning blog series will provide a road map to guide you through the key elements of your estate planning documents.
A well-formed estate plan will provide for many contingencies in life, including distributing your assets after your death, providing for your care in the event of your temporary or permanent incapacity, or designating a guardian for your minor children. Legal documents and specified arrangements form the estate planning process, but the two primary estate planning instruments are wills and trusts.
For some individuals, creating a will is sufficient for their estate plan. For others, a will and trust combination is necessary to accomplish their estate planning goals. To determine your correct path, you must understand the key differences between wills and trusts as they relate to your unique situation and goals.
Wills: The Foundation of Estate Planning
A will, also known as a last will and testament, is a legal document that outlines how your assets will be distributed upon your passing, determines who will be the guardian of any minor children you have, and provides for other determinations like the payment of debts and taxes. Here are some key points about a will:
- Simplicity: Wills are relatively straightforward documents, making them an accessible option for those with uncomplicated estate planning needs. If you don’t have a large estate or complicated situations to consider, a will might be sufficient for you.
- Probate Process: In North Carolina, wills typically go through a court-supervised process known as probate. During probate, the court validates the will, settles debts and taxes, and ensures assets are distributed according to your directions. Probate offers transparency and oversight, but it can be a time-consuming and costly process. While all estate plans will include a will in some capacity, if you pass your entire estate through a will, this can tie up important assets for an inconvenient amount of time.
- Testamentary Trust: If desired, you can draft your will to create a trust called a testamentary trust upon your death. You can include specific instructions for this trust in your will which will allow you to manage specific assets for the benefit of beneficiaries and retain a certain amount of control over your assets even after your passing.
Trusts: A Versatile Estate Planning Tool
A trust is a legal arrangement where you designate a trustee to hold your assets and manage them strictly according to your instructions. Trusts provide greater flexibility and control over the distribution of your assets. Key considerations and factors for creating a trust include:
- Privacy: Unlike wills, trusts are private documents and do not go through the probate process. This means they are not administrated publicly and don’t become public record. Therefore, the details of your estate plan—for example, the size of your estate, your beneficiaries, or specific gifts—remain confidential.
- Avoiding Probate: Avoiding probate not only promotes privacy but also provides for the swift and seamless transfer of your assets within the trust. This saves potentially months of time, court costs, and attorney fees.
- Versatility: You can form a trust to meet different goals. Revocable trusts allow you to retain control of your assets during your lifetime and specify how they should be managed if you become incapacitated. Irrevocable trusts can provide asset protection and protect your eligibility for certain government benefits. Special needs trusts can protect eligibility and provide control for any beneficiary with special needs. These are only a few examples of trust types and the purpose they serve. Consultation with an estate planning attorney to discuss your goals will enable you to create a trust that meets your unique needs.
Selecting the right estate planning tool depends on your individual circumstances and objectives.
These considerations include the complexity of your estate, your privacy concerns, your need for asset protection, and other considerations. Next on our Estate Planning blog series, we will get more in-depth on understanding the basics of a will. Stay tuned!
At Skufca Law, our experienced legal team is here to assist you in creating a comprehensive estate plan that aligns with your needs and goals. Contact us today at (704) 376-3030 to schedule a free 15 minute consultation and take the first step toward securing your family’s future.