Thanks to our partnership with Trust & Will, our clients can create wills and basic living trusts, along with Power of Attorney, Advanced Medical Directive, and HIPAA Authorization documents. Below we will cover the differences between these documents as well as how assets pass to beneficiaries at death. Not everyone needs a trust, in fact, most do not.
As shown in this flowchart, investment accounts almost always have named beneficiaries, these assets will pass outside of probate, without the aid of a will or trust. Bank accounts are a common exception, where most bank accounts will not have a named beneficiary, but you can call your bank to ask if this is possible.
So, why the need for a will or trust? You likely have many other assets that are not investment accounts, be it a house, a vehicle, a cool pen collection, it could be anything. Some of these assets (like a home or vehicle) can pass to a joint owner by titling law. However, that cool pen collection is going to go through probate. This is where a will comes in, your will can help guide probate to your wishes. Assets covered by a will still go through probate, and are distributed to your named beneficiaries on the will in most cases (barring scenarios in which the will is contested).
What if my will dictates that my IRA account goes to my daughter Suzie, but my beneficiary on the IRA account is my son, Robert? The account would go to Robert. Named beneficiaries on accounts will always supersede a will.
What if my will dictates that my car goes to my son Robert, but it is titled JTWROS with my husband? It will go to your husband, titling will always supersede a will.
A will is simply a good "catch all" to help direct smaller assets through probate that do not already have specific titling, beneficiaries or are already placed in a trust.
What's the difference between a will and a trust?
As shown above, a basic living trust is similar to a will in most ways, but adds a bit more control. Assets in a trust can have conditions upon the distributions to heirs, such as your kids obtaining a certain age before they are distributed the assets. Additionally, a trust does not go through probate, making for a cleaner (and cheaper) asset transfer to the intended beneficiaries. Please note that there are almost no tax advantages to revocable trusts. Parker wrote an article on this exact topic if you'd like to read more.
One other advantage of a trust is that you can designate the beneficiaries of all of your financial accounts to be the trust itself. That way if you want to change your beneficiaries, you can do it in one place (your trust documents) and all of your accounts across your entire investment universe will have been changed. It makes it easier to manage your whole financial estate plan in one place.
"Do I need a will?"
Unlike a trust, almost everyone benefits from a will. From the asset perspective, nearly everyone has some sort of asset that they want to pass to a specific person. But more importantly, when establishing a will we are also covering HIPPA authorizations, advanced medical directives, powers of attorney, and more. See below for a brief explanation of each of these documents