Wills vs Trusts: Choosing the Right Estate Planning Tool

Many of our clients who are interested in setting up an estate plan have done some research and talked to friends and family about what to do prior to meeting with us. Often, people have questions about avoiding probate, costs, and estate taxes. Most clients understandably want to preserve assets and simplify the process for their surviving spouse and heirs. In many instances, the question comes down to using a will or a revocable living trust. Which is best? What are the advantages and disadvantages of each? Most importantly, which estate planning tool best meets the needs of the particular client and his or her family? Let's take a look and compare some of the basics of wills vs. revocable living trusts:

Simple Wills

Advantages:

1. Effective estate planning tool for most people;
2. Usually less expensive to prepare initially;
3. Flexible and less complex than other options;
4. The current Federal Estate Tax exemption is $5.49 million and North Carolina has no inheritance tax - so death taxes are no longer an issue for most people.

Disadvantages:

1. Probate fees in North Carolina are currently $4.00 per thousand of value of the probate estate;
2. The probate process is time consuming and can be tedious - it is not uncommon for the complete probate process to take up to a year (and even longer in some cases);
3. All wills must be filed with the Clerk of Court - and are thereby accessible by the public;
4. Does not provide creditor protection to heirs;
5. While usually less expensive to prepare initially - often families have to hire lawyers and/or accountants to help them with the paperwork and tasks of administering the estate - leading to additional costs.

Revocable Living Trusts

Advantages:

1. There are no probate fees or costs incurred;
2. The trust document is not filed with any public office and remains private;
3. Can protect the trust beneficiaries from creditors and lienholders;
4. Trust assets pass to beneficiaries without court involvement;
5. Settlor can retain control over assets titled to the trust during his/her lifetime;
6. Revocable and amendable at any time during life of Settlor;
7. Becomes irrevocable upon death of the Settlor - allowing for provisions to protect and preserve assets for the beneficiaries over time.

Disadvantages:

1. Not generally used for tax purposes;
2. Can require some management and professional guidance over time;
3. Ideally assets are transferred to the Trust during the lifetime of Settlor - this can be done at death with a "pour-over" will, but this would require a probate of that will;
4. More expensive to set up initially than a will based plan.

Every family has different needs and concerns. This comparison between a will based plan and revocable living trust based plan hopefully has provided solid insight into which plan might work better for you. At The Doyle Law Offices, P.A. we always meet in person with our estate planning clients and take the time necessary to answer your questions, understand your situation, and develop the plan that best accomplishes your goals.

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