The foundation of your estate plan will be either a Last Will & Testament or a Revocable Trust and a Pour-Over Will. There are pros and cons to using both methods, and there is not a correct choice.
A Will-based plan may be appropriate if you wish to minimize both the initial cost of your plan and the work necessary to retitle assets. A Trust-based plan may be a better choice if you would prefer to do more work now in order to minimize the work of your fiduciaries upon your death. However, this will depend on the type of assets you own.
When you use a Trust-based estate plan that is properly funded, you can be more confident that your estate plan will be carried out as designed. Wills can be lost, destroyed, or ignored. Account ownership can be changed. Once a Revocable Trust is funded, the terms of the Trust control the disposition of property owned by the trust. However, the trust must be funded properly to work.
Third parties are more likely to reject a Power of Attorney than a Trust. Your successor Trustee is the legal owner, not just your agent.
Trusts can be helpful if you don’t recognize your own cognitive decline and place yourself in a position to be exploited or harmed, or if there is a dispute over who should control your assets.
A Will-based plan may be a better fit if North Carolina real estate and investment accounts or IRAs are your largest assets. These types of asset can be structured to avoid the probate process. But if you have real estate in another state or you have probate assets with significant value, such as business interests or equipment, a Trust could be a better option.
Your probate estate consists of property titled in your name that is not automatically transferred to someone else at your death. Your Executor administers your estate under the supervision of the Clerk of Court. Assets owned by your Revocable Trust avoid this process. If court supervision isn’t needed, a fully funded Revocable Trust will avoid the need for probate. In some cases, court supervision of this process is desirable.
With a Will-based plan, your entire estate file, including your Will, inventories and accountings, will become public records. Because Revocable Trusts are not supervised by a court, they remain private. For some people, keeping the terms of their estate plan and the value of their assets private is very important. For others, it is not a concern at all.
A Revocable Trust gives one set of instructions for your beneficiaries. In some cases, it may be easier to point all of your property toward your Revocable Trust rather than relying on multiple beneficiary designations, contract provisions, and your Will.
Revocable Trusts are not great tools for long-term care planning. You may wish to use the probate process if one of your planning strategies is to fund a testamentary special needs trust for your spouse. However, if it would be acceptable to create such a Trust only if your spouse is disabled at the time of your death, a trust may be appropriate, or even a preferred method of planning.
