A Will or Trust: Which is Best for You?

When it comes to deciding whether a will or trust is best for you, it is important to understand your options and which one is most appropriate for your situation.

Will

A testamentary will (simply referred to as a “will”) is a legal document used to transfer an estate to beneficiaries after the death of the “testator” (the person making the will). Within the will, the testator usually names a “personal representative” (same as an “executor”) for the estate. For a will to be valid in Idaho, it must meet specific requirements under Idaho law.

Revocable Living Trusts

A person, during his or her lifetime, may create a “revocable living trust” whereby the grantor (the person making the trust), trustee (the person who has legal authority to manage the trust assets) and beneficiary (the person who makes use of the trust assets) are all the same person.  After the grantor dies, depending on the trust instructions, the trust assets may be distributed outright or held within the trust and distributed over time or upon the happening of a designated event. Revocable living trusts may be appropriate for persons who own real property in more than one state or have a blended family where spouses have children from prior relationships.

Testamentary Trusts

A testamentary trust is a trust within a will. A testamentary trust is created upon the death of a person as specified in his or her will. The testamentary trust holds assets within the trust instead of outright distribution to a beneficiary. A common scenario is when parents create a testamentary trust to hold assets for the support of minor children or for college education for children until they reach a specified age. A testamentary trust can also hold assets for the special needs of a disabled child who receives government benefits.

Does Having a Revocable Living Trust Eliminate Probate?

To avoid the probate process, all assets must be transferred into the name of the revocable living trust. A common misconception is that a list of assets attached to the trust document accomplishes a transfer to the trust. However, the correct way to transfer assets requires an actual change to the title of assets including a home, certificate of deposits, bank accounts and brokerage accounts. Upon death, any assets titled in the name of an individual, not the trust, will be subject to the probate process.

For this reason, when a person creates a revocable living trust, it is best to also create a will, called a pour-over-will, as a safety net to assure that upon death any assets titled in the name of an individual are transferred to the trust and distributed accordingly. In Idaho, generally speaking, the probate process can be quite simple and relatively inexpensive.

A New or Updated Estate Plan

Whether a will or trust is appropriate for you depends on your circumstances. If you already have a will or trust, it should be reviewed periodically to make sure it reflects your current wishes and needs or upon any significant change in your life such as divorce or death of a spouse or beneficiary. Other important estate planning documents include a general durable power of attorney, living will and durable power of attorney for health care.

This article was written by Donna A. Schuyler, Attorney, who practices in the areas of estate planning, probate, elder law, and guardianship.

Donna Schuyler Law, PLLC; elderlawboise.com; Phone 208-344-1947