Estate Planning Academy Episode 12: Choosing Between a Will and a Trust

Do you have children (or a spouse) with substance abuse issues?

A trust can keep the money out of their direct control.  You can add conditions that their rent and utilities are paid directly to the landlord and utility companies.  And, you can add in a condition that if they are clean and sober, they can have the money.  Basically, you get to say when and how they have the money and protect them from themselves.

Do you have children under 30?

Most people under 30 are not mature enough or ready to manage a large lump sum of money.  You can attach “strings” to the money to force them to manage the money in a responsible way all the while restricting their access.  Maybe you only let them have the income from the money.  This forces them to invest wisely.  Maybe you let them have an allowance instead of a lump sum. You can reward your children for good behavior and withhold money for bad behavior.

Do you have children who will be going to college?

This is a very important reason to maintain control over the money.  Just as with children with addiction problems, you want to maintain tighter control over the money.  The trust should be setup in such a way that tuition, room, board, and utilities are paid directly.  They should be reimbursed for books.  Your children should receive an allowance for food and entertainment.  Then, you can decide if they get rewarded for good performance.  Perhaps for every semester with a GPA above 2.0, they get a lump sum reward.  Maybe you help make car payments.  At graduation, you can further reward them with a lump sum to help them get started without debt.

Do you have children with debt issues?

A trust can help shield the principal of the trust from your children’s creditors.  The creditors can still attach to the money that comes out of the trust, but they will have great difficulty in draining the principal of the trust.

Do you have children under 18?

A trust lets you, not a Judge, decide who manages their money, how it is managed, when they get it, and how it is to be spent.  Without a trust, a Judge will likely order the money into a court overseen trust, pick the manager, and at 18 give the money to your children in a lump sum.

Do you have a blended family?

A trust (or trusts) lets you divide the property in the way you want, while allowing the surviving spouse to use the property for their benefit.  It’s not uncommon for one spouse to enter a second marriage with  home and the other was a renter or decides to sell their home.

Do you want lifetime asset protection and management?

Assets in the trust will be managed by your successor trustee.  A Will only starts working after death.

Is avoiding probate important to you?

If you want to avoid probate, you need more than a will.  A Will alone requires probate.

Do you have children or a spouse with special needs?

A trust can be setup to supplement public benefits while not destroying their eligibility for benefits.