Differences Between A Will and A Trust
Wills and Trusts represent two different ways at looking at the world. Wills are simpler to create, but require their chosen fiduciaries to face more burdens after the Will creator’s death. Trusts require more coordination and effort initially, but avoid most of the burdens following the Trust creator’s passing. Aiming for simplicity is usually a good thing, but in estate planning looking at the whole picture is more important.
The differences between Wills and Trusts are best illustrated through the lens of a complicated family. A father with two estranged children and one close child wants to make a Will. There are two bank accounts without beneficiaries and a home which only have to be listed in the Will. The father would like to disinherit the estranged children and leave everything to his close child. Specific disinheritance language can be placed in the Will which clearly memorializes the father’s wishes. In this situation, he would like to exclude the estranged children from his estate, but New York Probate law requires these estranged children to either sign a Waiver of Process and Consent to Probate in front of a notary or have the opportunity to appear at a hearing for the estate if the forms are not executed. Before the home and accounts can be transferred to the child as directed by the Will, all parties must wait for the estranged children to be located and execute forms they probably have no interest in signing in front of a notary. The estranged children’s direct involvement in the Probate process runs counter to the intentions of the Will creator. This is one of the frustrating realities of how a Will operates under the law.
Picture that same father creating an Irrevocable Trust. He would choose his close child to be the Trustee. The home and two bank accounts would be transferred to the Trust at the time the Trust was created. The Trustee would make sure the assets are properly managed while the father is alive. After the father passes away, the Trustee would transfer the two accounts and the home to themselves as the Trust directs. The estranged children would not have to be located or consulted prior to the distribution of Trust assets. There is no Probate process required for the Trust.
For less complex families, the Probate process ends up being a filing fee, some signed documents, some attorney costs and a short delay. When land or property is owned outside of New York by a New York resident, having a Will instead of Trust can be problematic. Ancillary probate is the process by which out of state property is handled with regards to an Estate. First, an estate would be opened in New York granting estate authority to the chosen Executor. Next, an estate would be opened in the state where the property is located. Expect to pay two sets of lawyers, and pay additional filing fees. Finally, once the ancillary estate is opened then the property can be transferred as directed under the Will. In a Trust, the out of state property is transferred to the Trust and no ancillary probate is required. The Trustee can manage that property accordingly.
Knowing the differences between Wills and Trusts will allow you to make the right decision for your family. Talk to the professionals at Sloan and Feller today.