Trusts vs. Wills: Pros and Cons of Each
While no one wants to prepare for his own demise, if you have considerable property or even just a few valuable things, setting up a plan to dispose of your assets after your death is important. You have several estate planning options available to you, but the most common are wills and trusts. Our Hoffman Estates and Des Plaines attorneys have compiled pros and cons of trusts and wills to help you make an informed decision about which estate planning method is right for you.
Trusts: Pros and Cons
A trust is a pool of assets held for the benefit of a third party called a beneficiary. A trustee oversees the trust’s disposition to the beneficiary. You can create a trust by establishing one in your will, or you can create a trust while you are still alive (a “living trust” or “inter vivos trust”). The property in a trust remains in the trust until some specified event occurs, such as your death or the beneficiary’s reaching a certain age. When you create a trust, you are the settlor; if you create a living trust, you can also be the trustee.
A trust is useful because in some ways, it is more efficient than a will; after the settlor passes away, the trustee executes the trust and disposes of the trust assets as set forth in the trust. A trust also avoids many of the estate taxes that can befall an estate devised by will. A trust also gives you control over how the beneficiary receives the assets; for example, if you leave a large sum of money to your child in a trust, the trust can set forth how and when the child will receive the money after you are gone. You can set up a trust for specific purposes, such as to pay for a child’s education or to provide donations to a charitable organization.
The downside of a trust is that creating the trust does take some time, effort and money, and once you create a trust, you cannot simply take it back – there are steps you must take to revoke a trust, and then you must come up with a new way to devise the property. You can create a revocable trust to circumvent these problems, however.
If you create a living trust, you have the added complication of managing the property during your lifetime and designating a trustee to handle the property after your death.
Wills: Pros and Cons
A will is a legally binding declaration by a person, called the testator, that after his death, his estate will distribute his assets in a specific way. The benefit of a will is that creating one is low-cost; once you sign and execute the will, you do not need to do anything else unless you want to make changes to it in the future. Revoking a will is also simpler and easier than revoking a trust.
Wills, however, come with their own problems, such as estate taxes, probate court and the occasional long, drawn-out battle. Whether a will is right for you will depend on your family structure and your asset pool.
Many different types of trusts and many different types of wills are available, and which you choose will ultimately depend upon your particular circumstances. Illinois estate and probate law is complex, and you should consult with legal counsel to prepare your estate plan. Contact a Hoffman Estates and Des Plaines lawyer for more information about how to devise your assets effectively and efficiently after you are gone.