Clients often question whether they need a Will, a Trust, or both when creating an estate plan. This post will explore the different options families have when planning for their future.
What Is a Will?
A Will is a legal document that governs how assets that pass through the probate court are distributed. When discussing a Will, it is important to understand the difference between probate and non-probate assets. Probate assets are those assets belonging to the decedent that were not titled joint with right of survivorship, or do not name a beneficiary. These assets must go through probate and are the only assets subject to the terms of the Will.
A Will becomes legally effective at the death of the testator (the person who created the Will). Wills nominate an Executor – the individual appointed by the probate court to distribute assets as the Will directs. All actions taken by the Executor are court supervised. The Will can waive the requirement that the Executor post bond, which is an insurance policy to reimburse the estate if the Executor mishandles the estate assets.
If there are probate assets, the original Will must be filed with the probate court upon the death of the testator. This means your Will and the details in it will become public record available to anyone to see on the probate court website. The inventory of probate assets and accountings filed are also public records. Using a Will does not avoid taxes, creditor claims, or delays in distribution to beneficiaries. Typically, relying on a Will alone to transfer assets to beneficiaries takes longer (probate usually lasts between 6-12 months), costs more (filing fees, attorney fees, etc.), and requires additional oversight through the court-supervised process.
What Happens in Ohio Without a Will
Without a Will, Ohio’s laws of descent and distribution (ORC 2105.06) dictate how assets are divided and distributed.
Court rules also require whoever administers an estate in which there is no Will be bonded for double the value of the estate’s assets. Bond premiums are paid out of the estate, reducing the total funds distributed to beneficiaries. having a Will in place can save your estate real money by avoiding this added cost.
Why Every Estate Plan Should Include a Will
While Wills do have some shortcomings, they are recommended as part of every estate plan, even when it won’t be the sole method of transferring assets. Wills are especially useful for individuals with simple estates, those just getting started with estate planning, and young families, since a Will allows the testator to nominate a guardian for any minor children or adult children with disabilities.
We generally include a Will in every estate plan as a safeguard for any assets that didn’t list a beneficiary. Any asset that lists a beneficiary – whether an individual or trust – does not pass via your Will because it is not a probate asset. If there are any assets for which the testator forgot to list a beneficiary, or if a refund is issued to the estate of the testator at death, the Will acts as a safeguard to direct where those assets should be distributed. And remember, waiving the bond requirement for the Executor in the Will can avoid added cost.
What Is a Trust?
A Trust is a legal document that appoints a Trustee to hold, manage, and distribute assets for the benefit of certain individuals or organizations. Most commonly, a revocable trust is created to hold assets either for the Settlor (the creator of the Trust) during his or her lifetime or for funding at the Settlor’s death.
Unlike a Will, a Trust is a private document because it is not filed with the Court. If created and funded properly, a Trust can avoid probate process entirely, giving beneficiaries access to assets much faster. To avoid probate, the Settlor should make sure the Trust itself is listed as the beneficiary on all assets intended to fund it.
When a Trust Makes Sense
Trusts give the Settlor more control over how and when assets are distributed. Settlors can set limits on when beneficiaries receive funds and the amount the beneficiaries can receive at a given time. Trusts are useful for individuals with minor children or with disabled beneficiaries. Ohio law does not permit minors to receive funds outright, so assets for minors must be held in a pre-established trust. If a pre-established trust is not created, the Court will create a court-supervised trust for distribution of assets to minors or require a court supervised guardianship. Trusts established for disabled beneficiaries assist in asset protection and the continuation of public benefits for the disabled individual(s). Trusts can also be helpful if an individual owns property in other states, has multiple beneficiaries (especially in cases of blended families), for asset protection, and additional complicated planning strategies.
Do You Need Both?
Overall, all individuals should have a basic Will to ensure that assets are distributed according to your wishes, while trusts are useful for more complicated distribution schemes. Hickman Lowder assists clients in ensuring that their estate plans are tailored to their specific needs and familial situations.
Ready to Build a Plan That Fits Your Family?
Evert family’s situation is different, and the right combination of a Will, a Trust, or both depends on your specific goals. At Hickman Lowder, we help clients build estate plans tailored to their family needs, not a one-size-fits-all template. Contact us today to schedule a consultation and take the first step toward protecting your loved ones’ future.