Wills and trusts serve the same basic purpose, namely, to transfer your assets to your designated heirs after you die. The main difference is that a will is simply a set of instructions about the distribution of your assets to be implemented after your death, whereas a trust allows your or someone designated by you as a legal representative to use your wealth according to your instructions even while you are alive. Here are some other factors to consider when trying to choose to write a will or set up a trust in Virginia.
Pros and Cons of Wills and Trusts
- There are different kinds of trusts. All trusts go into effect as soon as you set them up; they even get a tax ID number. The IRS treats them much like businesses because they have income and expenses. In practice, a revocable trust is very different from an irrevocable trust. You cannot change the use of the assets in an irrevocable trust once you set it up; it is very much like a will that starts while you are alive. Meanwhile, you can make as many changes to a revocable trust as you wish.
- A trust has a trustee, the person legally authorized to manage the assets in the trust. You can name yourself as the trustee while naming someone else to assume the role of trustee upon your death, or you can name someone else as the trustee from the beginning.
- Wills have to go through probate in the courts. Probate can be an expensive and time-consuming process. The most intimidating thing about probate, though, is that it makes many of the terms of your will public. Trusts are not subject to probate, and thus they are better for protecting your privacy, which is what makes them an attractive choice.
- Virginia offers a third alternative, the small estate procedure. If your estate contains $50,000 or less in assets and excluding any real estate property, your small estate can go through a faster and simpler version of probate. An affidavit can be filed and delivered to the holder of the assets.
- Trusts cannot protect your assets from estate tax; Virginia does not have its own estate tax, but federal estate taxes still apply in Virginia. Beginning in 2018, and until at least 2025, as a result of the tax cuts and Jobs Act. $11 million are exempt from estate taxes. The average person does not have to worry about estate tax. Trusts are better for conveying assets to family members in a non-traditional family, such as to an unmarried domestic partner or to stepchildren that you did not legally adopt.
- A trust provides greater flexibility than use of a will and keeps you out of the public eye. The downside is the setup process requires some headache, such as transfer of assets into the trust while you are still alive. Consultation with your attorney will help decide which is better suited for you.
Professional Legal Advice Can Save You a Lot of Trouble
Any kind of will or trust is better than none, but it is advisable to have a lawyer review your will or help you establish a living trust. Getting professional legal advice from Ferguson, Rawls & Raines now can spare you a lot of family conflict in the future.