Estate Planning Basics: Wills or Trusts?

During the initial stages of estate planning, one of the early questions you may face could be deciding between a will or a trust. Each person’s situation is unique, and your specific facts will determine the best course of action for you. It’s essential to note that estate planning is for all estates, so even if you don’t have an extensive list of assets, some basic estate plans will save your loved one’s time and money after your death. While the best person to advise you on this matter is a licensed attorney, it can still be helpful to have a basic understanding of the options available to you in the state of Minnesota. 

Wills

If you have a smaller or less complicated estate, a simple will might be the right option. According to the website for Minnesota’s Attorney General, “A will is a simple way to ensure that your money, property, and personal belongings will be distributed as you wish after your death.” A will also gives you the opportunity to name your personal representative — the person in charge of carrying out your wishes. And if you have dependent children, this document will allow you to nominate guardians. 

It’s also important to note that having a will doesn’t guarantee your estate will avoid probate, so your loved ones may still have to deal with the often costly and time-consuming process. Further, wills are also part of the public record, meaning the nature and value of your assets will be known.

Dying without a will means Minnesota’s inheritance laws, using a set formula, determine how your estate will be distributed. That might not be aligned with your wishes, so having documents in place is essential. 

And as we’ve shared in the past, a DIY will might be tempting to save costs upfront, but it can be problematic, and therefore expensive, on the backend.

Trusts

For other situations, a trust could be the best option. Creating a trust allows you to manage the distribution of your assets by using a trustee of your choice. A trustee can be a friend or family member or a hired financial professional. An attorney might advise utilizing trust planning if you have a more complicated estate or significant assets. 

While there are many kinds of trusts, a common type is a revocable living trust. This kind of trust allows you to make changes during your lifetime, and it is active while you are still alive.

Some clients choose a revocable living trust because they want to have more control over the distribution of assets to dependent children. For example, if you don’t want your children to inherit all your wealth at a young age, this kind of trust can distribute certain percentages of the estate at specific ages. Perhaps they inherit a certain amount at the age of 25, more at 30, etc.

Other clients opt to create a trust because they own real estate in multiple states. With quitclaim deeds, the property can then be placed into trust and ultimately pass outside of probate court.

Finally, many choose to create a trust to avoid probate. Trust assets usually go straight to beneficiaries without the probate process, saving your loved ones time and money. Additionally, trusts offer more privacy. Only your beneficiaries will know the nature and value of the assets, whereas a will, when probated, is part of the public record.

Of course, the best person to advise you on the best choice for your estate is a seasoned attorney. Reach out to Schromen Law, LLC to schedule a free consultation today. We will help you make the most effective and efficient plans for your specific situation.