401-307-5556Do you need a will, or do you need a trust? Confused about the difference? The major difference is probate – which is the court process that applies to a person’s estate whether they leave a will or not. When it comes to estate planning, understanding the difference between probate and trust administration can significantly impact your loved ones and the future of your assets. Poor planning can lead to lengthy legal processes, unnecessary expenses, and stress for those you leave behind. Here, we compare side-by-side the outcomes of planning with a will vs a trust.
Probate Estate
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Trust Administration
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| 1. Court action is required. A petition must be filed with the probate court to appoint a personal representative of the estate. If there is no will, the petition is for “Administration.” Where there is a will the petition is for “Probate of Will.” |
Avoids court actions altogether. When properly drafted and funded, a Trust will render probate unnecessary, because you will transfer title of assets to the Trust, avoiding the need to retitle assets through probate. |
| 2. Process can take 6 months or more. Creditors have a right to be paid from the assets of the estate. From the time the probate is opened, creditors have a period of six months to file claims with the probate court. For this reason, the case must remain open for a minimum of 6 months. Very often, it will take a year or more. |
2.Beneficiaries will not have to wait 6 months to receive their inheritance. Once administrative fees, costs and taxes are calculated, the trust property can be distributed to the beneficiaries. Also, because the assets are already in the trust, your successor trustee will not have to wait to access funds to pay for final expenses. |
| 3. Probate case is open to the public. Probate is a matter of public record. Anyone may attend probate court hearings or request to see documents that are filed with the probate court. |
3. Completely private process. Trusts are not filed with the court. The only persons entitled to see the trust are your successor trustees and your named beneficiaries. You may be relying on state laws and/or probate court judges to decide who gets your assets and who is in charge of your estate. The appointment of your executor or estate administrator must be approved by the probate court. |
| 4. You may be relying on state laws and/or probate court judges to decide who gets your assets and who is in charge of your estate. The appointment of your executor or estate administrator must be approved by the probate court. |
4. You are in control of how you want your assets distributed. You will be able to control how your beneficiaries receive their share of the trust assets. |
| 5. You may be opening the estate up to taxes. Failing to plan for your estate can result in your beneficiaries or heirs paying inheritance and/or capital gains taxes. |
5. Can avoid or minimize estate taxes. When drafted and funded correctly, trusts may significantly reduce or eliminate costly tax burdens. |
Of course, this is not an exhaustive list of all the differences between planning with and without trusts, but a basic overview of the consequences of your estate planning, or lack thereof! Whether you need to include a trust in your estate plan depends upon your circumstances and your goals. You should talk to an experienced estate planning attorney to assess your situation and create a plan that works for you. Book a call with Jill M Santiago by clicking the link below!
[…] or not someone leaves a will, probate is often necessary. It is a common misconception that creating a will, or holding assets jointly, will avoid probate. Simply leaving assets to someone in your will does not give them the right to […]