Deciding between a Last Will and Testament and a Living Trust in Utah can be daunting. Wills fill many roles in an estate plan, but a Trust is either: 1) a nice supplement to a Will; or 2) a critical piece of the estate plan. How can you tell which role a Trust will fill in your estate plan? Based on your age, stage of life, risk factors for disease, and business interests, you can decide what you need.
Age and Probate Avoidance
Probate is the court-supervised process of transferring assets of a deceased person. One of the key differences between a Will and a Utah Trust is the potential to avoid the probate process through a Trust. While a Will governs the distribution of assets, it does not exempt assets administered under its authority from the probate process. However, a Utah Living Trust will fully govern and administer any assets held under its name, exempting Trust assets from probate.
Due to this probate-avoidance quality of a Living Trust, many aging Utahns elect to have a Trust. For anyone with a terminal illness or expecting to pass away within a short period due to age, a Trust is a crucial element of any Utah estate plan. However, for younger Utahns, a Trust may only be an added upgrade to an estate plan as far as probate avoidance is concerned.
Providing for Minor Children
Most estate plans for parents and grandparents provide in some ways for minor beneficiaries. Sometimes, the funds left to minors come from investments and assets, and other times the funds come from life insurance proceeds. Whenever these proceeds are left directly to a minor child, that child’s legal guardian – whoever that may be – is the steward of those funds and will manage them until the child is an adult.
Through a Will, any asset can be transferred to a minor child with ease, whether to that child directly, to a custodian, or through a Trust created at the time of the administration of the Will. However, any option placing conditions of receipt of those assets until a time greater than age 21 would be through a Trust. That Trust can be created as part of the administration process of the Will, or as part of a Living Trust. The administration of the Will is tied to the probate process, so planning for minor children through a Living Trust is far more efficient and is not contingent on court delays and filings.
If any funds left for minors will not be needed for several months following the death of a parent, then a Living Trust is merely a convenience in administration. However, if those proceeds will be needed for a child’s support within weeks after the death of a parent, then a Living Trust is likely a far better option for providing for minors.
Planning for Incapacity
A Last Will and Testament is of no effect until the person signing it (Testator/Testatrix) is deceased. However, a Utah Living Trust is effective immediately upon signing and from that point governs any assets owned by the Trust.
In situations where someone loses capacity to manage their own financial affairs due to stroke, Alzheimer’s, dementia, or any other ailment, a Will is not effective. Family members must then go to court to obtain a costly conservatorship to manage the finances of their loved one. While a power of attorney can sometimes mitigate the need for a conservatorship, many financial institutions and title companies will not accept a power of attorney after a certain period of time has passed, even though they are required by law to do so.
A Trust immediately manages the assets held by it, so anyone occupying the office of Trustee can manage those assets. During the lifetime of the grantor of the Trust, that is usually the grantor. However, if the grantor becomes disabled or resigns, the new Trustee can manage the Trust without the need for court supervision.
A Trust then is a key element of an estate plan for anyone with risk factors for losing capacity to manage their own finances.
Closely-Held Business Interests
Finally, one more component in the decision between a Will and a Utah Living Trust is whether or not the grantor has a closely-held business interest. Most likely, this takes the form of a business owned by the grantor and a few other people at most. These small businesses often rely on the relationships and skills of the owner, rather than a smooth-running independent operation.
If your business is such that it would not be viable without your involvement after 6 months, then probate is not an acceptable option if you were to pass away. Through internal documents and a Utah Living Trust plan, we are able to ensure your loved ones can sell or manage your business affairs immediately following death or accident, instead of picking up the pieces months later when there is little left to manage.
For most small business owners, a Utah Living Trust is a key component in their estate plan, as a Will alone would not do the job.
If you still have questions about whether or not your estate plan includes a Utah Living Trust, feel free to schedule a free phone consultation here online or give us a call at (801) 896-4377.
Republished with permission from the Middle Class Estate Plans Blog