Imagine this situation:
You don’t have a Will, and you know you should. So, you schedule an appointment with an estate planning attorney and ask them to draft your Will. After explaining your goals, the attorney suggests creating a trust in addition to your Will, which is substantially pricier. Now you are wondering: “does my attorney think I am worth millions? Do I actually need a trust?”
If this has happened to you, don’t worry! This is a common scenario at Estate Planning firms. A trust is a complex legal tool, costing more to prepare than a Will. However, despite being pricier upfront, a trust is often more cost effective overall than a Will.
When someone passes away with only a Will, their estate will very likely go through probate before distributions are made. In Vermont, probate takes at least one year and assets are not passed to beneficiaries until probate is concluded. Bank accounts will sit in limbo, a house cannot be sold, and cars cannot be re-titled until the court allows such action. Also, if a lawyer is hired to navigate probate, a year of attorney’s fees will ultimately be deducted from the estate.
Read Does a Will Avoid Probate? to learn more about a Will’s role in the probate process.
If assets are in a trust, then probate is avoided. This means the court does not get involved. After passing away, assets will be given directly to the beneficiaries, saving time, court costs, and attorney’s fees. Because probate is avoided, a trust will likely cost significantly less than only having a Will.
Read Which Assets Go Through Probate? to learn which assets can be transferred into Trusts to avoid probate.
This explanation is an oversimplification of a complex area of law. Sometimes, under the right circumstances, probate can be avoided without a trust. Further, one may decide paying for the trust now is more inconvenient than having probate costs come out of their estate after their passing. These are all factors best considered with an estate planning attorney.
When your estate planning attorney suggests creating a trust, they are likely considering the long-term costs. However, if you are questioning the need for a trust, remember that your attorney’s job is not only to create your estate plan, but to explain it as well – so when unsure, ask questions!
Thorin Blitz, Esq.