While sitting down with your spouse to prepare your estate plan, you’ll likely talk about two fundamental documents: a will and a trust. 

But before you get lost in a sea of internet search queries about which is right for you, let’s take a step back and help you create a strong foundation that may reveal your needs and clarify the answer.

Today, we’ll tackle the following:

• The importance of building a tailored estate plan
• How a will and/or trust could fit into that larger plan
• Common misconceptions about wills and trusts and what to know instead

Put Your Plan Before The Documents

Your estate plan is just that—a plan. It’s a comprehensive, coordinated strategy that extends your wishes and legacy to the next generation (and beyond). 

Different documents, like a will and a trust, are simply tools to help express your plan optimally. How will you know what that means? We talk about sticking with these three core estate planning concepts:

• Honor intent
• Maximize efficiency
• Minimize taxes

When you understand your intent, your estate planning attorney can help you leverage the appropriate documents to carry that plan out. 

While nearly everyone can benefit from a tailored estate plan, people don’t necessarily need every estate planning document available. 

Think about this concept like building a house. You probably wouldn’t use super glue to attach new roof shingles, but that doesn’t make super glue invaluable. In fact, it will probably come in handy when you’re unloading and accidentally ding a vase or other breakable item, far more than cap nails would. 

As with a house, there’s no magic wand you can wave to create an estate plan that works for you. Wills and trusts have their places in different people’s plans for various reasons. 

When it comes down to it, wills and trusts are simply documents and tools that help support your plan. Deciding which documents to use without context is like putting the cart before the horse—it can throw your plan off balance. 

So how will you know if a will or trust is the right vehicle to support your estate plan? You’ll start by determining what you want the administrative process to look like. 

Let’s dig into that a bit more below. 

Basic Mechanics Of Wills and Trusts

There’s a reason that wills and trusts are the most widely discussed estate planning topics—they have a core concept in common: 

Both a will and a trust allow you to express your intent. 

Since honoring your intent is often priority number one on people’s estate planning wish list, leveraging these tools effectively is a big deal. 

The difference between the two lies in how that intent is processed. 

If you’ve searched for information about wills and trusts before, you’ve likely come across this statement: wills go through probate, and trusts avoid probate. At this point, your mind might be racing with questions like:

• My loved one had a will and didn’t need to go to probate, so why would I?
• Is a trust the only way to avoid probate?
• Do I have enough money to justify establishing a trust? 

Don’t worry; that’s hardly the end of the story.

Let’s bring some much-needed context to clear up these common misconceptions about using wills and trusts in estate planning.

Can You Use A Will And Avoid Probate?

Depending on the tools you use to support your intent, yes! 

Remember, your will is a document that enables you to express your intent regarding your assets after you pass. But you could leverage other vehicles to help facilitate the wealth transfer process, like beneficiary designations, joint ownership, deeds, and more.

When you use them appropriately, those designations avoid probate. So you could have a will that states you want to split your estate evenly among your children and use beneficiary designations and other tools to actually carry that wish out. 

Think about it like this: if a will is a map, the other vehicles are the car, streamlining your assets from point A to point B. 

Avoiding Probate With A Will and Other Documents: A Case Study

Here’s an example to put this idea in perspective. 

Bob and Carol Branch recently retired and are considering a formal estate plan. They’ve worked hard and accumulated the following assets: a house in Michigan, two retirement accounts, and a life insurance policy. 

Each of their three children gets along well, and the Branch’s want to split their assets evenly among their kids. This is one example of what they could do. 

• Create a will that states the intent to distribute their entire estate evenly.
• Put a ladybird deed on the house that has the house go to their three kids when they pass.
• Name spouses as primary beneficiaries and each child as contingent beneficiaries on the retirement accounts and life insurance policy.

As you can see, this family isn’t using their will as their Plan A. Instead, it’s a vessel for communicating and validating their intent while other tools run in the background. 

Given this family’s relatively straightforward intent and assets, a will accompanied by these other tools makes sense and keeps their assets out of probate court. 

Do I Need A Certain Amount of Money To Use A Trust?

Perhaps the most prevailing misconception about trusts is that you need to have a certain net worth to make the most of it. 

But trusts and net worth aren’t one and the same. 

When deciding if a trust makes sense for you, consider this question:

Do you want to impose a separate administrative process for dividing your assets?

Trusts can be effective ways to bring additional structure and organization to the wealth transfer process. In several cases, the families that benefit from trusts are the ones who have specific hows, whens, or whys regarding their estate. 

Perhaps your children don’t get along, and you want more structure for paying bills and settling the estate tab before they get their share of the inheritance. In that case, you could allocate some assets (learn which assets make sense to put in a trust here) to go to the trust after you pass. Your trustee would use that money in the trust to pay for things like funeral costs, debts, taxes, etc., and then split the remaining balance per the trust’s terms. 

Let’s bring the Branch family back for a new example. 

Trusts Enable You To Set A Process: A Case Study

Welcome back, Bob and Carol Branch. Remember their three kids? In this scenario, they aren’t on friendly terms, and two of them can be rather careless about their finances. 

They still want to split their assets evenly. But, given the circumstances, Bob and Carol don’t believe that the children could achieve a fair, equitable, and fight-free split by inheriting the assets outright, so they’re looking into establishing a trust.

Assuming they have the same assets from above, here’s one example of what they could do differently. 

First, they could have the house and life insurance policy paid to the trust upon their deaths. Doing so avoids probate and brings more structure to the ongoing expenses. They could have the trust pay for things like the property tax, maintenance, upkeep, and more on the home without relying on the kids to split the payments among themselves. 

They may also decide to keep their three kids as primary beneficiaries on their retirement accounts, so that money would bypass probate outside the trust and go directly to the heirs. 

So while trusts may be advantageous when you have a more complex financial situation, they are also super beneficial for those with more complicated family dynamics. 

Remember, Keep Your Plan In Charge

It’s important to establish a strategy where your plan determines the administrative process, not the other way around.

When you understand your plan and your intent, your estate planning attorney can help you determine creative solutions that meet your needs. 

Wills and trusts are two estate planning documents that can validate your final wishes, but which you use depends on your intent, assets, family dynamics, and more. We’re proud to collaborate with an estate planning firm that can help you determine your needs and devise a plan. 

If you want to learn more about if a will or trust can best suit you, set up a call with us, and we can connect you with a law firm. 

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