Attorneys in some jurisdictions have a preference for Wills as the primary estate planning vehicle. Other attorneys prefer Trusts as the primary vehicle. This posting is not designed to convince either set of attorneys. This sets forth the differences, so that newer estate planning attorneys can decide for themselves.
When Wills are the primary estate planning vehicle, the assets of the decedent must go through the probate process to reach the intended beneficiaries.
- Some states have cumbersome probate processes, but others do not.
- Probate is a very public process, by its very nature. While some clients may not object to this post-mortem scrutiny of their finances, others abhor it.
- Wills “speak” only at death and do nothing during lifetime incapacity.
- Wills can do tax planning for a credit shelter trust or for descendants.
Trusts, by comparison:
- Typically bypass the court system for most (or all) of the administration process.
- Trusts are not public documents and lend greater privacy.
- Trusts are effective immediately and may be utilized for incapacity planning.
- With a trust-based plan, a simple “pour-over” will is used to supplement the trust.
- Trusts can do tax planning for a credit shelter trust or for descendants.
Of course, in a state with a cumbersome or time-consuming probate process, the advantages of a trust are self-evident. In jurisdictions without a cumbersome probate process, the two strongest points in favor of trusts are their privacy and their ability to be used during incapacity. Of course, powers of attorney can provide some protection during incapacity. However, powers of attorney are not as readily accepted by financial institutions. This is particularly true as powers of attorney age. Some title companies will not accept powers of attorney for real estate transactions, unless the power was created within a period of less than a year or two. While it may be a good practice for clients to review their estate plans every year or two, few actually do so. As Americans are living longer lives, the chance of a client encountering a period of incapacity is ever-increasing. So, having a solution for this problem is an essential part of any estate plan.
Stephen C. Hartnett, J.D., LL.M.
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (800) 846-1555
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