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Which Is Better: A Will Or A Trust? (1 Of 3)

By Myka Landry

The question of whether to have a will or trust is one that needs to be answered by individuals as they do their estate planning. The bottom line is that it depends on your specific situation.

In this column, the first of a three-part series on the topic, I will talk in general terms about the differences between wills and trusts. Next month, I’ll go into more details about trusts. The following month, I’ll talk about wills and when they might be sufficient to take care of your needs.

Let’s get started.

Generally speaking, upon your death, a will and a revocable trust accomplish the same purpose. They dispose of your property according to your instructions. In addition, both documents can provide tax planning to limit your heirs’ tax liability.

However, a properly-funded revocable trust can provide some incapacity planning during your life as well. That is not to say incapacity planning cannot be accomplished without a trust; it is just done differently.

Regardless of which document you choose, certain tasks need to be completed upon death. Assets must be gathered, bills paid, tax returns filed, taxes paid (if applicable) and property distributed.

The main difference is that with a will, your assets are distributed through the probate process. In Colorado, we have a simplified probate process, so it is usually not too expensive or difficult.

Since probate in Colorado is generally not that difficult, avoiding probate, by itself, is not the primary reason to do a trust instead of will, especially since a trust can be more complicated and expensive to prepare.

As a Colorado resident, one reason to do a trust instead of a will is if you have real property in another state. With a will, your heirs would have to go through probate in every state where you have property, which can be expensive and time consuming. With a properly-funded trust, your heirs can avoid probate in all states in which you own property.

Two other reasons to consider a revocable trust instead of a will are your asset structure and family situation. If you have a large amount of assets, a trust might be better because many banks and financial institutions feel more comfortable working with trusts. If you have a contentious family situation, a trust might better suite your situation because it may provide more privacy and may be more difficult to challenge than a will.

One additional note about revocable trusts: They do not provide asset protection for you during your life, contrary to what many people may believe.

Whether to do a will or a trust is up to you. A qualified estate planning attorney can help you evaluate your situation so that you can make an informed decision. This column only talks about these issues in general terms and is not intended to constitute legal advice or create an attorney-client relationship.

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