Most people agree that having some sort of estate plan is a good thing. However, many of them haven’t taken any steps to get an estate plan in place because they don’t understand the nuances between wills and trusts – and dying without either.
Here’s what will generally happen if you don’t do anything (no will or trust), have a will, and have a trust.
Don’t Do Anything
If you don’t any estate planning, then you will die “intestate”. This means that your estate will go through probate and state laws will control how your estate is divided.
You’ll have no control deciding who gets what and when.
If your children are your only heirs and you haven’t provided any instructions, state law will mandate divvying up proceeds equally.
Adult children will get their shares immediately.
A court appointed guardian will manage the money for minor children until they become adults. The guardian can charge for their services and can be a total stranger.
Most importantly, if you die without a valid will, the court – not you – will decided who raises your minor children. This could also be a stranger.
Bottom Line: Dying intestate allows state law and the court to make all the decisions on your behalf – regardless of what your intent might have been.
Have a Will
If you have a valid will, your assets still go through probate process. However, your assets go to the people identified in your will. This gives you some control as opposed to dying without a will.
You can also name a guardian for your minor children in your will and the court will usually abide by your wishes.
You can also dictate who will receive your assets – your children, favorite charity, or 8th grade math teacher. Your wishes are detailed in your will.
Bottom Line: While a court oversees the process, having a will allows you to tell the court exactly how you want your estate to be handled.
Have a Trust
If you have created a trust, you have taken control of your estate plan and assets. Trusts are not subject to the probate process.
You’ll have named a trustee to manage your estate with specific instructions on how your assets should be dispersed and when.
One important note is that a trust needs to be funded in order to bypass probate. This means that your assets have been retitled in the name of your trust.
Think of you trust as a bushel basket. You must put the apples into the basket as you must put your assets into trust for either to have value.
You do still need a will to pour any assets inadvertently or intentionally left out of your trust and to name guardians for minor children.
Bottom line: Trusts allow you to maintain control of your assets through your chosen trustee, avoid probate, and leave specific instructions so that your children are taken care of – without receiving a lump sum of money at an age where they are more likely to squander it or have it seized from them.
No matter what your situation is, it is important to think about and take action with regard to your estate plan. Talking with an estate planning attorney about what type of plan works best for your family is a great first step.
Scott Aubrey is Needham estate planning and business law attorney, who helps families and small businesses plan for their future. He is also the owner of Aubrey Law.