One of the most common questions asked by our clients is, “What is the difference between a will and a trust, and which is right for me?”  Last week, I provided a brief summary of the differences between these two common estate planning tools in a vlog.  You can view the vlog here.  In this blog post, I’ll provide more details about the distinguishing factors.

Wills and trusts share some commonalities, including:

  • You may use a will or a trust to direct how and to whom your assets will be distributed upon your death. Some estate plans include both wills and trusts, although the trust generally is the centerpiece of the estate plan if it includes both tools.
  • Regardless of whether you use a will or a trust as the centerpiece of your estate plan, both wills and trusts need to be administered after death, meaning that there is work to be done to distribute your assets to your loved ones after your death. The attorneys’ fees associated with administering wills and trusts are approximately the same.

The most significant difference between wills and trusts is probate.  Probate is the court-monitored process of transferring your assets to your loved ones.  If you have a will, your assets will be administered through the probate process.  Generally, if you have a trust, your assets will be transferred to your loved ones without probate.  My colleague, Ashley Hawley, provided a step-by-step overview of the probate process here, and a quick summary here.

In Wisconsin, probate can be an orderly process.  Most of the time, the necessary probate paperwork may be filed electronically by your attorney and no court hearings are required.  However, there are circumstances in which your loved ones may be required to appear in court, such as if there are disagreements among them.

Despite the relative efficiency of the probate process in Wisconsin, there are several things that many clients do not like about probate:

  • Probate delays the administration of your assets. Wisconsin law requires a creditor claim period.  During this period, we need to publish creditor notices in local newspapers and wait for any unknown creditors to file claims against your estate.  The creditor claim period is 3-4 months after the initial probate paperwork is filed with the court.  We can’t finish the probate process until after this period has expired, even if we have satisfied all known creditors and are confident there are no unknown creditors.  On the other hand, there is no formal creditor claim period involved in trust administration and, as a result, your loved ones may receive your assets and complete the trust administration process more quickly.
  • Probate requires filing paperwork in the public court records. The probate paperwork requires reporting all assets that you owned upon your death, what each asset is worth, and to whom the asset was distributed.  Anyone may obtain copies of the probate paperwork for a small fee.  Many clients are uncomfortable with this lack of privacy regarding their personal finances.  In addition, many clients are concerned that their loved ones may be exploited if the wrong person obtains copies of the probate paperwork, knowing the nature and value of the inherited assets.  Trusts allow clients to maintain privacy regarding their assets and who receives them after death, since the court is not involved in the trust administration process and Wisconsin law does not require the trust document to be filed in the public court records.
  • Probate requires paying an inventory filing fee to the court. The fee is 0.2% of the value of your probate assets.  This fee sounds small, but it adds up quickly.  Consider the fee for one of your most valuable assets – for example, your home – by multiplying the value of your home by 0.2%.  Alternatively, since the court is not involved in the trust administration process, there is no fee paid to the court.

The simplest and most reliable way to avoid probate is by using a trust as the centerpiece of your estate plan.  However, depending on the nature of your assets, you may be able to avoid probate without using a trust.  In future posts, we will discuss other estate planning tools, like payable on death (P.O.D.) and transfer on death (T.O.D.) designations, beneficiary designations, and titling assets to avoid probate.

If you have questions regarding whether a will or a trust is right for you, please feel free to contact any attorney on Ruder Ware’s Estate Planning Team.

Disclaimer

The content in the following blog posts is based upon the state of the law at the time of its original publication. As legal developments change quickly, the content in these blog posts may not remain accurate as laws change over time. None of the information contained in these publications is intended as legal advice or opinion relative to specific matters, facts, situations, or issues. You should not act upon the information in these blog posts without discussing your specific situation with legal counsel.

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