Estate Planning for Business Owners - Asset Protection

Wills vs. Trusts: What's the difference?

Both a Will and a revocable trust allow you to direct where you want your assets to pass upon your death. Additionally, both a Will and a revocable trust can deal with any estate tax issues which may need to be addressed. Both instruments are integral in the following types of legal affairs planning and matters:

• Estate Planning and Legacy Planning.
• Charitable Planning
• Prenuptial Agreements
• Special Needs Planning
• Business Succession Planning
• VA Benefits Planning
• Probate

However, there are key differences between these planning tools you should know.

Will Based Estate Plan:   

A Will can accomplish many of the same goals as a revocable trust as far as determining who will receive your assets upon your death. A Will is a much simpler document than a trust and does not require you to retitle assets like a trust does. 

Wills may be ideal for those who have less complicated estates. Such as...

• If you do not own any real estate.
• You are only passing on a modest amount of cash, and non-probate assets such as a life insurance policy, and a retirement fund to your spouse or loved ones.
• If avoiding probate is not a large concern and/or transferring assets to a trust is not something you want to deal with, a Will may be a better fit for you. 

Trust Based Estate Plan:   

Generally, a revocable trust provides two benefits over a Will: the trust avoids the expense and delay and avoidance of probate and it allows you to plan for incapacity. The second benefit of a revocable trust is that if you become incapacitated and cannot manage your financial affairs, a “successor Trustee”, whom you have previously named in the trust document, is appointed to manage your trust assets for your benefit. This ensures that your assets will be managed for your benefit during your lifetime, even if you become unable to make those decisions for yourself.  

The reasons for setting up a trust include:

• Tax planning: A trust provides greater control and planning tools for reducing or eliminating the tax burden you and your estate. This includes during your lifetime and when you pass away.
• Asset protection: You have more tools and controls for protecting your legacy, assets, public benefits and loved ones.
• Privacy: Unlike a will, your trust wont be available for the public to see your planning 
• Specific Planning Tools: Specific provisions including special needs trusts, spendthrift provisions, or setting up trusts for minor children. 

A revocable trust does have some downsides when compared to a Will, however. First, a trust is typically more expensive to set up as it is a more complicated document and requires more expertise to prepare than a Will. Second, trusts require a level of continued attention during your lifetime which Wills do not. A revocable trust only controls the assets it owns, which means that assets without a beneficiary designation or joint ownership need to be transferred to the trust. If assets are not owned by the trust upon your death, they will be subject to probate and one of the key benefits of the trust will be lost. This requires some diligence to ensure assets are titled properly so that the trust operates as intended.

Get Your Legacy Planning Started Today

Need assistance? The Obi Law Group is here to offer you the extensive estate planning counsel you are looking for to assist you in managing your legal affairs. Planning is half the battle. Call us or schedule your appointment today to consult with our experienced estate attorneys. We’ll review the differences between a will and a revocable trust while helping determine which approach is best for you and your loved ones.