When it comes to planning your estate, two of the most commonly used tools are a Last Will and Testament and a Trust. These legal documents help manage how your assets are distributed after your passing, but they serve different functions and offer distinct advantages. In Michigan, as in many other states, understanding how each document works and why you might need both can help you develop a comprehensive estate plan that ensures your wishes are honored efficiently, privately, and without unnecessary delays.
What is a Last Will and Testament?
A Last Will and Testament, often referred to simply as a “Will,” is a legal document that specifies how your property will be distributed upon your death. It also allows you to designate a personal representative—the individual responsible for carrying out your wishes. The Will can include details such as:
● Who will inherit your assets
● How your estate will be divided
● Any charitable donations or specific gifts you wish to make
● Guardianship arrangements for minor children, if applicable
Key Features of a Will:
● Probate Process: In Michigan, a Will must be filed in the probate court to initiate the court-supervised process that validates the document, pays off any debts, and manages the distribution of your estate. This procedure commonly referred to as “probate” can be lengthy and expensive.
● Public Record: Since probate is public, the details of your Will—including who inherits what—become accessible to the public, potentially compromising your privacy.
● Post-Death Effect: A Will only takes effect after your death. It does not manage your assets if you are incapacitated before you pass away and only distributes assets without beneficiary designations or assets that are jointly owned.
What is a Trust?
A Trust is a legal arrangement where you transfer ownership of your assets to a Trustee, who then manages and distributes them based on your instructions. Unlike a Will, a Trust can take effect while you are still alive and continue after your death. While there are many types of Trusts, including Special Needs Trusts, Retirement Trusts, and Pet Trusts, the most common type is the Revocable Living Trust.
Key Features of a Trust:
● Avoids Probate: One of the primary benefits of a Trust is that assets within it bypass probate. As there is no court involvement, asset distribution is typically quicker, private, and less costly.
● Management During Incapacity: If you become incapacitated, a Trust allows a successor Trustee to step in and manage your assets, eliminating the need for a court-appointed guardian or conservator.
● Privacy: Trust details remain private, unlike a Will, which becomes a public record. This is advantageous for those who wish to keep their financial matters confidential.
● Flexibility: Trusts offer greater flexibility by allowing you to set specific conditions for when and how assets are distributed, such as when a beneficiary reaches a certain age or achieves specific milestones.
Why You Need Both
While both a Will and a Trust can work together to create a comprehensive estate plan, they each serve unique purposes. Here’s why combining both is often recommended:
1. The Pour-Over Will: A key function of a Will in conjunction with a Trust is the creation of a pour-over Will. This type of Will serves as a safety net for any assets that were unintentionally left out of the Trust or acquired after its creation. The pour-over Will ensures these assets are transferred to the Trust upon your death and managed according to its terms.
2. Guardianship for Minor Children: A Trust manages asset distribution, but only a Will can designate a guardian for your minor children. If you’re a parent of minor children, it’s critical to have a Will that names a guardian for your children in case something happens to you. Without this, the court will decide who raises your children without your input.
3. Handling Unfunded Assets: Not all assets are titled in the name of your Trust, such as proceeds from a wrongful death action. A Will can ensure these assets are distributed according to your wishes and direct them to the appropriate beneficiary.
4. Ensuring a Complete Plan: While a Trust can manage the majority of your estate and avoid probate, a Will provides additional clarity.
The Bottom Line: A Well-Rounded Estate Plan
Having both a Last Will and Testament and a Trust helps create a more comprehensive and secure estate plan. The Trust offers privacy, avoids probate, and provides flexibility in managing your assets during your lifetime and beyond. Meanwhile, the Will ensures that any assets outside the Trust are properly transferred and addresses personal matters, such as naming guardians for minor children.
Estate planning is multifaceted, and everyone’s needs are unique. Working with an estate planning attorney is essential to tailoring your Will, Trust, and other planning tools to your specific circumstances. With the right legal documents in place, you can ensure your loved ones are cared for, your assets are managed effectively, and your privacy is maintained.
Don’t wait—start planning now to secure your future.
Call or email our office to set up a consultation today: (248) 873-3244 / info@bluechipestateplanning.com
