When you make plans for your estate in Michigan, one of the most critical decisions you must resolve is whether to use a will or a trust. Both accomplish the same basic task of directing your assets where you want them to go after you’re gone.
But they have significant differences, and what might be an advantage for one client may be a disadvantage for another. As a result, this often means that one option is the best choice for any particular situation. Read here: Wills vs. Trusts in Michigan.
Understanding Wills and Trusts
What is a Will?
A is a legal document that lays out the manner in which a person desires their assets to be divided upon their death. It also permits the naming of an executor, a person who manages the estate just mentioned, and one who will ensure that any child who is a minor at the time of the parent’s death is cared for until that child reaches adulthood.
What is a Trust?
A trust is a legal construct that holds and manages property for the benefit of someone else. The most frequent type is a revocable living trust, which lets you control its assets during your lifetime and lets your heirs avoid probate after your death and before they receive your property.
Trusts can also be irrevocable, meaning they can’t be changed after they’re set up; often, this provides tax shelters for the rich and protections against creditors.
When to Choose a Will
A will can be the better choice if:
- Your estate is small, with limited resources.
- A simpler and less expensive estate planning solution is what you would like.
- You require a guardian to be named for your small children.
- You have a good understanding of how probate works. You are not concerned about its possible expense and hold-up.
- Legal disputes or challenges in relation to your estate are not a likely scenario.
When to Choose a Trust
A trust may be your best option if you meet any of the following conditions:
- Avoiding probate allows for a speedier and more private transfer of assets to beneficiaries.
- You possess extensive resources or real estate across several states.
- If you wish to keep things private, since trusts are not part of the public record, you can create a trust.
- You are worried about not being able to function and prefer a trustee to take care of your business if you can’t handle it yourself.
- You possess either a blended family or particular wishes concerning inheritance that necessitate careful, directed planning.
- You desire to govern the manner and timing of your beneficiaries receiving their inheritance (e.g., instead of a single payment, receiving several payments spaced out over time).
Costs and Complexity
Creating a will usually costs less, but it can lead to very expensive probate costs if the estate is even somewhat complex. A trust, on the other hand, requires more money up front to draft and fund, but it can save a bundle by avoiding probate and reducing estate taxes.
Combining a Will and a Trust
In Michigan, numerous individuals utilize wills alongside trusts. Read here: Wills vs. Trusts in Michigan. A common tool that partners with a trust is a pour-over will, which guarantees the transfer of any assets not placed in the trust during life into the trust upon death.
Also, a will is still requisite when it comes to naming persons who will serve as guardians for children under the age of 18.
Updating Your Estate Plan
No matter what you decide, a will or a trust – your estate plan needs to be reviewed and updated regularly. Life events might necessitate changes to your estate plan to ensure it still reflects your wishes. Such events include marriage, divorce, the birth of a child, or major changes in your finances.
Read here: Wills vs. Trusts in Michigan
In Michigan, choosing a will or a trust as part of your estate planning can depend on several factors, including your goals for the estate, your financial situation, and how much privacy and control you want. In these instances, it’s important to work with legal and financial experts to make sure that you specific wishes are met.