Use a will or a trust in estate planning?

By Gary Hachfeld, University of Minnesota Extension

(Second of four articles)

Many people are confused about whether to use a will or a trust in estate planning. Each has its advantages and disadvantages.

A will is a legal and binding contract that allows you to name a personal representative to administer your affairs upon your death. You can name a guardian for any minor children, provide for special needs for children or a spouse and leave instructions for the distribution of your assets. In the will, you can leave property to someone who would not otherwise inherit under the state’s intestacy law — if you passed without a will. You can disinherit someone via your will, except for your spouse unless the spouse agrees to not receiving the inheritance.

However, a will does not allow you to do disability planning nor does it protect your assets from lawsuits, divorce and other adverse actions.

A will does not enable you to bypass or avoid probate. A will actually triggers probate in Minnesota if you own more than $20,000 worth of assets or any real estate. Probate is a court-administered process. Probate, on average in Minnesota, costs between 2 to 3 percent of the decedent’s estate value or net worth and takes about 18 months. Probate is also a public process. Anyone can go to their courthouse, ask for anyone’s probate records and be allowed to see them.

A trust is a legal entity that allows you to hold and manage assets. There are two general types, revocable and irrevocable. The revocable living trust (RLT) is the most common because it can be changed. When you place assets into the RLT, you still have complete control of the assets. Nothing changes. You can remove or add assets to the trust and you pay your taxes just as you always have.