Estate planning tools such as wills and trusts serve as the foundation for a solid plan, regardless of the size of your estate. Exploring the fundamental purposes of each can help you make informed decisions that best suit your estate planning objectives.
What is a will and why do you need one?
A will is like a set of instructions you leave behind that tells people what you want to happen to your assets when you pass away. It is a simple legal document that speaks for you when you cannot. A will can help you with the following:
- Determine the distribution of your estate: With a will, you have the final say in who inherits your assets. Without one, state laws dictate the distribution, which might not align with your preferences
- Dictate your guardianship decisions: For parents, a will is a vehicle to appoint a guardian for minor children, an important decision that should not be left to others.
- Streamline the probate process for your loved ones: A clear will can expedite the legal process known as probate, easing the burden on your family during a difficult time.
If you die without a will in Michigan, the court will divide your estate according to Michigan’s intestacy laws.
Why you need a trust even though you have a will
Setting up a trust is more complex than writing a will. It is a separate entity where you put your assets (like your money, house or stocks) and appoint a trustee to manage them. You could be the initial trustee also. While many types of trusts are available, they all have a common goal: to manage your assets for the benefit of your chosen beneficiaries. A trust can give you the following additional benefits that a will cannot:
- Avoid probate: Unlike a will, a trust and the assets within the trust arrangement do not go through probate. That means your beneficiaries can access the assets in the trust faster, and the process is private.
- Control from beyond the grave: You can set rules for how and when your beneficiaries will receive the assets in the trust. Think of it as giving gifts in a scheduled manner or with very specific instructions.
- Protection for your assets: Trusts can also protect your estate assets from creditors and even help you save on taxes.
Each type of trust has its own rules and benefits, and setting one up usually requires some help from an experienced estate planning lawyer in your state. Even though you cannot specify who will be the guardian of your dependents, you can continually and regularly provide for them with a trust.
Choosing the right estate planning tool
Choosing between a will and a trust depends on what you need. Remember, this is not an all-or-nothing choice. You can use a will and a trust to complement each other and to address all your estate planning concerns and objectives. Estate planning may seem intimidating, but it is about choosing the right tools and setting them up correctly to ensure your wishes are clear and enforceable and your loved ones are cared for.