Posted on: 17 November 2022
Estate planning is much more than making a will, as many probably already know. If a will is the main part of an estate plan, a trust is a very close second. A trust can do almost anything a will can do, but perhaps do a better job of it. Read on to learn more.
A Trust Avoids Probate
While it's correct to say that a trust does not need to be probated, it does not have the power to eliminate probate. Property is used to fund a trust, and that property is exempt from probate. For example, if you have some stocks and bonds and they are listed in your trust, those stocks and bonds do not need to be also listed under the probate inventory of assets. However, you must still file the will or the estate with the probate court, regardless of having a trust.
A Trust Can Substitute for a Will
Even though many believe that a will is unnecessary if they also have a trust, that is not the case. You will need to have a will even if it has no property associated with it. The purpose of a will, for the most part, is to give those owed money by the estate an opportunity to file a claim. Once an estate is filed in probate court, creditors are urged to come forward if they believe they are owed money by the estate. Creditors of the estate might include hospitals, nursing homes, mortgage lenders, credit card issuers, and more.
The probate court reviews all claims and decides which creditor, if any, can be paid. Many estates have very little to pay creditors if most of the assets are held in a trust. However, certain priority creditors may be allowed to seek assets held in a trust in certain situations. High-priority creditors include the IRS, Medicare, Medicaid, and others. The creditor situation is why estates must be probated if they contain a minimum amount of assets, regardless of having a trust.
A Trust Cannot be Changed
Trusts used in estate planning can be of several different types. The two main types of trusts are revocable and irrevocable. The revocable trust is considered more flexible in that certain changes may be made without revoking it (making it useless). For instance, you can make changes as to the person you put in charge of the trust, the trustee, using a revocable trust. However, many aspects of the revocable trust may not be altered. An irrevocable trust cannot be changed in any way. If the trust is no longer adequate or appropriate for your needs, you must file papers to do away with it.
To find out more, speak to an estate planning lawyer.Share