When it comes to estate planning, many people have the mistaken impression that a will is their only option. However, trusts can be a powerful tool for protecting your assets and ensuring your family has a level of care for their long-term future. Let’s look at wills vs. trusts and explore how a will can work together with a trust to provide comprehensive estate planning protection. And we’ll also answer the question, “Does a will override a trust?”
The Last Will and Testament: Last Wishes of a Deceased Person
A will is a legal document that outlines your wishes for who will receive your property and other tangible items or possessions after you die. You may also name a guardian for any minor children and an executor who settles your estate and carries out your final wishes, including funeral arrangements.
It’s also crucial to note that retirement accounts are not subject to a will. So, if you name beneficiaries for your retirement accounts and then pass away, the designated beneficiaries will receive the assets held in those accounts – regardless of your will.
When writing a will, it’s crucial to name the correct heirs for retirement accounts so that the property will not face contestations or cause family drama. If property held in a retirement account names one beneficiary but the will names another beneficiary, your heirs will face conflict.
For this reason, keeping your will and retirement account documents up-to-date is essential. Staying on top of estate planning will ensure that your executor may fulfill your final wishes.
The Trust: A Separate Legal Entity
A trust is a very different legal arrangement than a will. When you draw up a trust, you (the grantor) transfer ownership of your assets to a separate entity. The entity is the trust, and you, as the grantor, no longer own the trust property. Instead, the trust owns all trust assets.
Another party you name (the trustee) manages your assets to benefit your chosen beneficiaries. (The grantor may also be the trustee and the beneficiary in some types of trusts.)
A trust has its own separate legal documents and can hold real property and distribute assets after a person dies. However, instead of an executor disbursing assets, your trustee will disperse assets according to the trust’s terms.
Types of Trusts
Trusts can be either revocable or irrevocable. Revocable trusts can be changed or dissolved by the grantor at any time, while irrevocable trusts are relatively permanent once created.
If you have a revocable trust, you may alter or dissolve the trust at any time. However, an irrevocable trust is much more permanent. So, if you create an irrevocable trust and later change your mind, you may not be able to dissolve the trust and receive your assets back.
Both of these types of trusts have many benefits, though. For example, a living trust allows your estate to avoid the legal proceeding of probate court and pass assets directly to your heirs. And you don’t lose access to a living trust’s assets, since it is revocable. Living trusts can be crucial in avoiding the public nature and legal fees associated with probate courts.
One example of an irrevocable trust would be a Medicaid trust. In this type of trust, you don’t have ownership of or access to the assets in the trust. Instead, because the trust is irrevocable, Medicaid does not count the assets in the trust against you when they determine your eligibility for nursing home or assisted living benefits. This way, you can receive Medicaid benefits to pay for long-term care while keeping your hard-earned assets to benefit your beneficiaries.
Testamentary trusts are set up through a will and only take effect after the grantor’s death. You don’t need to fund a testamentary trust while alive. Instead, the will names the assets to pour into the trust after the grantor dies, so the estate avoids the probate process.
Many people use both wills and trusts as part of their estate planning strategy. For example, you may use a will to name a guardian for any minor children and direct how your executor should distribute assets upon death. Then, you can use trusts to hold those assets for the benefit of your chosen beneficiaries.
Does a Will Override a Trust?
Generally, a will does not override or cancel a trust agreement. However, there are some specific circumstances in which a will may override a trust.
An example in which a will might override a trust is if the trust’s terms are illegal or go against public policy. In this case, a court may void the trust’s provisions and order your assets distributed according to your will.
It’s also possible for a will to override a trust if the two conflict with each other. For example, let’s say you create a will to pour your assets into a trust you leave to your first child. However, later you change your will to leave those same assets to a second child. Depending on how it plays out in court, the court may distribute assets differently than you planned.
A will does not usually override a trust. In fact, a will is often used in conjunction with a trust to provide comprehensive estate planning protection.
If you’re thinking of planning for the future, you may be wondering whether a will or trust is suitable for you and your family. Let’s take a closer look at how these two estate planning instruments work together to create long-term plans for your future and your family’s future.
Consider Both a Will and a Trust
When it comes to estate planning, both wills and trusts have their own distinct advantages. Wills are typically less expensive and easier to set up than trusts. They’re also more flexible, meaning you can change them as your needs and circumstances change over time.
Trusts, on the other hand, offer greater asset protection and can help you avoid probate. Trusts can also help you qualify for public benefits or keep assets from creditors.
If you’re thinking of writing a will or creating a trust, it’s essential to understand the difference between the two and how they work together. Wills and trusts each have their own benefits to help you create a comprehensive estate plan that meets your specific needs and objectives.
Now that you know a little bit more about wills and trusts, you can start preparing with an estate planning attorney for your family’s future today.
We Can Help
At Vail Gardner Law, our experienced estate planning attorneys work with you to create a unified estate plan using both wills and trusts to care for your personal property, digital assets, and real estate. We can also help you plan for incapacity and long-term care needs. Contact us today to learn more about how we can help you create a comprehensive estate plan for your future.