I Have a Will—Do I Need a Trust?

You’re aware of the importance of estate planning, so you’ve had a will prepared. A last will and testament is the basic building block of most Michigan estate plans. A will covers a lot of ground: it allows you to name a guardian for your child and dispose of all your assets. In light of that, do you really need a living trust in addition to your last will and testament?

The answer is a resounding “maybe.” There are many things a trust can accomplish that a will cannot. If any of these goals are important to you, you might be best off having a trust in addition to your will. It’s less expensive to have a living trust created than many people think, but of course there is some expense involved. You should discuss with an experienced estate planning attorney whether the benefits of a living trust are worth the cost.

What Is a Living Trust?

Do I Need a TrustA living trust is a legal document used to place your assets in trust during your lifetime, for your benefit. After your death, a successor trustee you have named will take control of those assets and manage or distribute them as you have directed for the benefit of people you have chosen—your beneficiaries. A living trust is sometimes referred to as a “revocable” trust because you have the power during your lifetime to revoke or modify the trust.

During your life, you have full use, control, and benefit of assets placed in the trust. You can place almost anything in the trust: money, vehicles, real property, investments, and so forth. The key is that you must actually fund the trust, which means to place ownership of those assets in the trust. Creating a trust without funding it is like opening a bank account without putting any money in it: it can’t do anything for you.

When You May Need a Trust

What are some circumstances in which you may need a trust in addition to your last will and testament? Consider whether any of the following apply to you.

You want to exercise control.

Control is one of the primary benefits of a trust. If you use a will to leave your assets to an beneficiary who is a legal adult at the time of your death, they have immediate and full control of the assets. If you have an intended beneficiary you believe might be too young or irresponsible to manage the inheritance wisely, a trust is often a good idea. The trustee can make payments to the beneficiary as you have dictated, or make payments to others (say, a landlord or university) for the trustee’s benefit.

Some people even use living trusts to motivate their beneficiaries’ behavior, for instance, by authorizing extra payments if certain conditions are met, such as if the beneficiary graduates from college.

You want to avoid probate.

Along with the desire for control, avoidance of probate is one of the top reasons many people give for having a trust. The probate process in Michigan can be cumbersome and time-consuming, especially if you have significant assets or if you fear your heirs will fight over a will. A trust allows your assets to pass much more quickly and with less red tape.

If you have real property in another state, such as a vacation or rental property, placing that property in a trust also means the property won’t have to go through the other state’s probate process.

You want privacy.

Many people don’t realize that when a last will and testament is filed with the probate court as is necessary to distribute its contents, it becomes public record. If your next door neighbor or ex-spouse wants to go down to the county courthouse and see what you had and to whom you left it, they are perfectly able to do so. A trust, however, is not filed with the court and is not a matter of public record. If you want to keep your final business private, a trust may be right for you.

You want to protect someone with special needs.

If you have a loved one with special needs who cannot care for him or herself, that person may rely on government benefits or programs to survive. If your loved one inherits assets from you outright, however, he or she may no longer qualify financially for the government programs without “spending down” the inherited assets. Creating a special type of trust for that person’s benefit will allow them to inherit from you and still maintain government benefits.

If you believe having a trust could benefit you or your loved ones, talk to an experienced Oakland County estate planning attorney to learn more about whether you really need a trust, and what type of trust is right for you. Attorney Jim Hubbert has helped numerous clients use trusts to protect their families and achieve other estate planning goals.