An estate plan in the form of a will or private trust safeguards your wishes and the well-being of your family in case of your incapacity or sudden demise. Families and individuals with sizable assets are especially vulnerable should the principal breadwinner pass away without a proper plan in place.
A recent survey suggests that almost 60% of Americans do not have wills or estate planning. Some of the reasons given include meager assets to bequeath, lack of information and little time for it.
Estate planning can seem daunting. But keep in mind how precarious it is to families when loved ones die without proper plans in place. While you should consult with an experienced estate planning partner to help in the process, we’ve put together this list of five considerations to help you figure out whether you need a will or private trust for your family.
Does your family own a business?
A private trust trumps a will when it comes to family businesses. Trusts allow your successor trustees, who can be a family member, to continue running the business when you become incapacitated or die. Wills, in contrast, require a probate court appointed personal representative. It’s a process that can take several weeks or months, thus imperiling your business. The representative would also need probate court approval to continue running the business or sell the company after you die.
What types of assets do you have?
Simple assets like bank accounts, 401(k)s and life insurance can be dealt with using durable power of attorney and a clause in your last will that makes them “payable on death.” Real estate — especially family property in another state — may benefit from a private trust to avoid probate proceedings on your estate. The value of your real estate holdings and any applicable state law determines the process at the time of your death.
Are there minor beneficiaries to consider?
For minor beneficiaries (those under the age of 18), a testamentary trust in either a private trust or last will ensure they inherit part or even your entire estate. It’s worth noting, however, that a testamentary trust created under a will is subject to oversight by a probate court while that in a private trust isn’t. Additionally, if minors are named as payable on death beneficiaries on 401(k) or IRA accounts, the court creates a minor guardianship for them until they reach 18 years.
Do you have privacy concerns?
Your will, including a majority of probate court filings, are public records that anyone can search and read. Keep in mind that these documents list your heirs’ names and addresses, your estate’s worth etc. Private trust documents, however, are confidential. Only your beneficiaries and successor trustees can examine copies after your demise. This safeguards the privacy of your family affairs from prying eyes.
What about will contest worries?
Contested wills are common. It’s why some lawyers consider private trusts a better vehicle for estate planning. However, the period given to challenge a private trust is longer. A contested trust can therefore drag the process and add costs to your family.
Ultimately, whether your family opts for a will or private trust comes down to your financial situation, personal preferences and privacy concerns.