Wills versus Trusts: Do I need a Trust?

What is a Will?

A Will, also known as a Last Will and Testament, is a document stating how your probate estate is distributed after you die. It has no legal effect until it is probated. In Georgia, Wills are probated in the Probate Court for the county where the decedent resided.

What is a Trust?

A Trust is a different sort of document. A trust can have legal effect before your death, after your death or both. A Trust can solve problems associated with managing money after your death, such as looking after a loved one who isn’t able to manage money. Trusts create a set of rules concerning how your assets are managed, used and distributed by a Trustee.

Reasons for Using a Trust

Common reasons for using a trust include:

• Planning for an individual with special needs;
• Planning to avoid probate (this isn’t usually something to worry about in southern states, but can be significant in states where probate is expensive such as California or New York);
• Complex tax planning;
• State tax planning;
• Charitable planning;
• Planning to avoid ancillary probates where real estate is owned in other states;
• Providing creditor protection to your loved ones;
  • Some beneficiaries are spendthrifts;
  • Some beneficiaries have risky jobs;
  • Some beneficiaries have shaky marriages;
• Planning to ensure bequests pass to children from prior marriages’
• Restricting the use of your assets (e.g., providing they can only be used for education);
• Encouraging use of your assets for specific purposes (e.g., using an incentive trust);
• Any other reason you have for reaching back from the grave and controlling how assets are used.

Bottom Line

So, the bottom line is everyone should have a Will, but you only need a trust if there is some reason for using one. There is nothing wrong with having a trust if it’s going to provide some benefit to you or your loved ones, but you should understand the reasons for needing one. Be wary of advisors who recommend a trust without discussing the reason for having one. Some advisors operate or are associated with “trust mills” who charge significant fees to set up trusts. And like hammer salesmen who think every problem looks like a nail, if you’re running a trust mill, every estate needs a trust.