Once you begin estate planning, you will quickly start to hear people discussing whether it’s better to have a will or a trust. But don’t be swayed by some generic answers. What matters is what will the best for you, and that will depend on several factors—the most important of all being what you want to accomplish with your estate plan.
WHAT ARE THE KEY DIFFERENCES BETWEEN A WILL AND A TRUST?
With a will in Tennessee, you name your beneficiaries, and you designate which specific assets go to each beneficiary. A will is a public document that is filed and authenticated in a formal court process known as probate after your death. Typically, probate proceedings will last for six months to a year, and heirs usually cannot take possession of their inheritance until the end of probate.
In Davidson County, filing fees for probate are fairly low at $289.50 (lower than other counties or states); however, under the court’s local rules, anyone who appears as the estate’s executor, administrator, or other fiduciary must be represented by an attorney. Attorneys’ fees—which are paid out of the estate—can be expensive.
By contrast a revocable living trust is a way of avoiding probate, streamlining your estate after you pass away, and ensuring you have privacy as it relates to your assets and their distribution. There are no filing fees with a trust and no maintenance fees. Trusts are relatively easy to create, but they are generally more expensive to prepare than a basic will. In addition, you must fund the trust after you created it. That means that you must personally go to the banks or other financial institutions and transfer the assets to the trust itself. You control the assets as the trustee and receive the benefit of them for your lifetime. At your death, a successor trustee you name is appointed under the trust and they ultimately gain control of the assets and distribute them based upon the terms of your trust.
WHAT ARE SOME ADVANTAGES OF HAVING A TRUST OR A WILL?
Neither a will or trust is technically superior. Both have their advantages and disadvantages. In choosing between a will or trust, it really just depends on your circumstances. If you would like a simple document that passes on your assets and picks someone to be in charge once you are gone, a will probably is the best choice.
Here is a short list of the pros and cons of a will:
- Not as much work to create a basic will
- Less expensive
- Probate is often required after you pass away
- Your family must pay attorney fees and court costs
- Your assets and how they are distributed can be made public
Similarly, the benefits and drawbacks of a trust are as follows:
- A trust avoids probate after you pass away
- Saves money on the back end by not incurring probate costs
- Streamlines the distribution of your assets
- Nothing is filed in court so a list of your assets and how they are distributed is never made public
- Helps avoids conservatorships as the trust assets are
- It is more costly to create a trust on the front end
- The process of creating and maintaining a trust is more complicated than creating a will
- You must fund the trust by moving assets inside it
In addition to this list, a common misconception needs to be addressed. Often it is believed that a revocable living trust, the type of trust we discuss in this article, provides liability protection and tax benefits. That is not the case with a revocable living trust. Of course, there are certain types of trusts that do provide those protections, but they are generally irrevocable trusts and poorly suited as your main estate planning vehicle.
IS THERE ANYTHING THAT SPECIFICALLY REQUIRES A WILL OR A TRUST?
While there are no circumstances that specifically require a will or trust, they each have their advantages over each other. For example, if you own property in more than one state, having a trust helps avoiding probate in multiple states. Tennessee courts cannot control distribution of property in other states so probate would most likely have to be opened in those states to pass down an inheritance. Opening probate in multiple states can be expensive and is generally a good idea to avoid if at all possible. Having a basic revocable trust in place can make that process much easier.
HOW SHOULD I DECIDE BETWEEN A WILL OR A TRUST?
An estate attorney should advise you, but here are some questions to help decide if a trust or will is better for you:
Consider having a will if you…
- Desire simplicity
- Routinely acquire new assets and do not want to worry about how they are titled
- Have a fairly simple estate
- Desire the court to oversee the administration of your estate
- Not worried about probate
Consider a trust if you…
- Want to avoid probate
- Want your assets and their distribution to be as private as possible
- Own property outside of Tennessee
- Are concerned about having a mental or physical disability
- Have a larger or more complex estate
- Want to make it easier on your family to transfer assets at your death
WHAT WORKS WELL TODAY MAY NOT WORK TOMORROW
Whether you choose a will, a trust, or both, a qualified Nashville, Tennessee estate attorney can help you. The most important thing to remember is that an estate plan is just that—a plan for your family’s future.