Do I need a Will or a Trust?
If you are considering creating an estate plan, you are probably wondering whether you should choose a Will or a Trust. While there are many considerations involved in making an estate plan, this is one of the most common questions that arises. In order to properly weigh the options, many factors should be taken into account. This process can be time consuming and confusing, but we are here to help. Use the below guide to help you think through the pros and cons of both a Will and a Trust to determine which is better for you and your family and speak with our experienced attorneys to prepare an estate plan tailored to you and your family’s needs.
Inventory of Assets
You may be wasting time and money on the wrong estate planning documents if you haven’t prepared an inventory of your assets. Many clients wonder – “Why do you need to know every asset I own, how it is titled, and it’s value?” The truth is that what types of assets you have, what individuals are owners of those assets, and what their values are are the first step to determine what happens to your assets when you become incapacitated or injured, and therefore which plan is right for you. When you contact our firm for an estate planning consultation, we will provide you with a form that guides you through this step, including everything from cash, real property, and vehicles, to life insurance, investments, and businesses.
Classification of Assets
After completing the inventory of all of your assets, each asset must be classified to determine how it will be administered if you are incapacitated or deceased. What does it mean to classify your assets? Different classes of assets are administered in different ways. For example, specific laws govern real property. The deed explains the nature and ownership of the real property. The approximate value can be derived from an appraisal, tax records, etc. When our attorneys develop an estate plan for you, they will review the inventory of your assets and classify them for you. For more on classifications of assets and how they are administered, click here. Classifying your assets is key for determining whether you should use a Will or Trust in your estate plan because these documents govern different types of assets.
Take the ownership of a home, for example. One can own a home in a variety of ways. Commonly, the titled is held in their individual name. It can also be held jointly with another person like a spouse. Sometimes it can be held in a company like a limited liability company (LLC). Another option is to hold the home in a trust. The way the house is titled will determine how it is administered when the owner dies. Other factors that affect administration include mortgages or liens on the property, whether someone else lives on the property, costs to maintain the property, among others.
- If the house is owned in the owner’s individual name, the house will be administered through the probate process.
- If the house is owned jointly with another person like a spouse, the entire property vests automatically with the surviving owner on the date of death of the first spouse.
- If the house is owned by an LLC, the member’s interest in the LLC will be administered through the probate process unless it is in a trust. If the house is owned by a trust, it will be administered pursuant to the instructions provided within the trust.
- If the house is owned by a Trust, the Trust Agreement explains what happens with Trust assets on the occurrence of specified events, for example, the Grantor and/or Trustee’s death.
See how different titling conventions produce different administration results? This is the power of properly inventorying and classifying your assets.
Spouses
Who your legal and chosen family members are impacts your estate plan in many important ways. Arguably the most impactful family member is the spouse. Generally, you can leave assets to the people or entities of your choice at your death. The spouse, however, can circumvent your choice should you choose to disinherit them in your Will.
How is that?
A spouse has a right of election under the South Carolina Probate Code to take one-third of the decedent’s probate estate if the decedent was domiciled in South Carolina. Under this law, the assets that the spouse would calculate their one-third election from include all assets passing through the probate matter, either pursuant to the decedent’s Last Will and Testament or by the general law of inheritance called “intestacy”. That value is reduced, however, by funeral expenses, administration expenses, and enforceable claims filed against the estate.
Why does this matter?
Not everyone wants to leave their spouse all, or even one-third, of their estate. Blended Families are a perfect example.
Families are formed in many ways, through marriage, partnership without marriage, divorce followed by another marriage, giving birth, adoption.. the list goes on. In blended families, where one or more spouses has one or more children with a person other than their spouse, unintentional disinheritance can be a concern. This can occur when the entire estate is left to the spouse, who goes on to leave all of their assets only to their own children, new remarried spouse, etc. Our attorneys can help blended families plan accordingly, allowing both spouses to rest assured that if they pass first, their children won’t be later cut out of their family inheritance.
Your Goals
Finally, assessing your personal goals is the most important part of this process. Once you have identified what you have and who is legally entitled it, you need to start considering who you want to receive it, and when and how that will occur. Our attorneys will counsel you through these decisions, explaining techniques you can utilize in the way you hold your assets and documents we can draft on your behalf that will achieve your goals.
*not legal advice. Doesn’t create an attorney client privilege. No guarantees.
If you are in need of assistance, the attorneys at Collins Family & Elder Law Group can help.
