Your Money: Benefits of a trust versus a will
July 22, 2013
A few months ago, I wrote about the need for every family to have a will and other documents to protect their assets and their family after their death. The next step in this conversation is to discuss the benefits of a trust versus a will. Always seek advice from an attorney for these matters, because opinions vary greatly. There is no doubt that trusts offer substantial benefits over wills, but whether or not your personal situation would benefit more from one or the other remains up to you and your legal counsel.
The first benefit of a trust is avoiding probate. This benefit is two fold. Probate means that your will goes to the court system to be interpreted. Although the costs vary greatly from state to state, I've never met someone who preferred for their hard earned assets to go to the courts rather than their heirs. Probate also means that your documents are filed with the probate courts and become a matter of public record, including the value of your assets and your beneficiaries.
How is a trust different? In laymen's terms, a will is a document that specifies to the courts how you want your assets distributed. A trust, on the other hand, is a document that takes effect on the date of your death. A trust specifies exactly what is supposed to happen and becomes legally binding as of that date, and does not require the courts to interfere. This is very important if you want absolute control over what happens to your property after your death.
Planning for mental disability is the second benefit of a trust over a will. A will takes effect after you pass away. A properly written trust offers the ability to dictate actions in the event that you are disabled or no longer able mentally capable to manage your finances. This is called a disability plan, and is not included in all trusts, but is a very valuable component.
Why wouldn't everyone want a trust? There are a few drawbacks. Trusts are more expensive to set up than a will, and require more legwork both in setting them up and maintaining them. Once you set up a trust, you must spend time and some money "funding" the trust, or moving your assets into the name of the trust. If this step isn't done properly, then your estate will still be subject to probate in order to be settled.
I cannot stress highly enough that having a will or a trust is a must for every family. A little time and effort up front can spare your family considerable stress later.
Michele Knight, owner of Knight Accounting & Technology, is a CPA and QuickBooks ProAdvisor based in Dillon. For more info and to contact her, visit http://www.cpamichele.com.
Recommended Stories For You
Trending In: Columns
- Mountain Law: Is it against the law in Colorado to leave a child unattended in a motor vehicle?
- Life on the Summit: There’s plenty to be thankful for
- Mountain Law: What is a ‘Rule 408’ discussion? (column)
- Holen: Mountain bikes on the Colorado Trail leave something to be desired (column)
- Liddick: Castro and the bloody failure of Communism (column)
- Colorado 14er for sale: Buy Culebra Peak in the Sangre de Cristo Range for $105 million
- First family of whitewater: Into roaring Browns Canyon with the Foleys of Performance Tours Rafting (video)
- Mountain Wheels: Second-generation Subaru Crosstrek aims at outdoorspeople (column)
- Biff America: Six commandments we can all agree on (column)
- Colorado couple’s connection to Courage Classic runs deep