Is seems like the most common question I receive as a Grand Rapids, Mi estate planning attorney – what is the difference between wills and trusts? Does my family need a will or a trust?
Well, as you might expect, the answer to the second question is different for every family. Why? Because no two families (or individuals) are the same. Oh, sure, there are plenty of attorneys out there who will look at your family’s assets and tell you what you should have. That approach doesn’t sit well with me. I think it’s best to share with you some of the advantages and disadvantages of wills and trusts, and let you determine what is best for your family based on who you are and what’s important to you.
So, here are some examples of how wills and trusts differ on a few key considerations:
- Privacy:Wills – with a Will there is no privacy. Documents and proceedings after death are public record. Trusts – totally private, unless court intervention is required, which is usually a result of poor drafting, lack of funding, or loss of Trustee.
- Disability Planning:Wills – no provisions for physical or mental disability. The disabled person is subject to the court process for guardianship. Need a power of attorney, updated over the years. A power of attorney can provide that disability be determined privately by family members and friends. Trusts – Handles assets upon disability without court intervention. Need a power of attorney for non-trust assets. A trust can provide that disability be determined privately by family members and friends.
- Creditor/Predator Protection:Wills – None while alive. Testamentary trusts can give protection. Trusts – None while alive. Creditors have only a specified amount of time to present claims after death or they are forever barred. Trusts which become irrevocable at death can give protection.
- Effort Required:Wills – Less effort now unless you require tax planning and asset protection for your heirs, but more work for your heirs after disability or death. Trusts – More effort now to properly design the trust to accomplish all of your goals upon disability and after death, but far less work for your heirs after disability or death if done correctly.
- Cost Now:Wills – less. Trusts – more.
- Costs to Amend:Wills and Trusts – similar.
- Cost Later:Wills – average all-inclusive cost of a probate in Michigan is 3-5% of the value of the estate. Trusts – No probate fees if the trust has been fully funded and properly maintained and trust administration fees less than estate administration fees.
In a future post we’ll look at how wills and trusts compare on common family goals. Make sure to contact us at 616-827-7596 if you have any questions and to schedule a Peace of Mind Planning Session to see how wills and trusts compare in your family’s specific situation.
Michael Lichterman is an estate planning and business planning attorney who helps families and business owners create a lasting legacy by planning for their Whole Family Wealth™. This goes beyond merely planning for finances – it’s about who your are and what’s important to you. He focuses on estate and asset protection planning for the “experienced” generation, the “sandwich generation” (caring for parents and children), doctors/physicians, nurses, lawyers, dentists, professionals with minor children, family owned businesses and pet planning. He takes the “counselor” part of attorney and counselor at law very seriously, and enjoys creating life long relationships with his clients – many of which have become great friends.