Question:

What is the advantage of a trust over a will if your estate is under $5 million?

Response:

There are several advantages to using a trust no matter the size of your estate. Here are a few:

1. Avoiding probate. The process of probating an estate can be expensive and time-consuming. Using a trust can avoid the expense and delay of the probate process.
2. Privacy. By avoiding probate, you also keep your affairs private. Everything filed in the probate court is open to public view.
3. Flexibility. Trusts allow great flexibility. For instance, you can say that your beneficiaries receive their inheritance at specific ages, rather than all at once.
4. Divorce and Creditor Protection. You can have the trust continue for your beneficiaries to provide divorce and creditor protection for them.
5. Incapacity Protection.  Your trust will provide for management of your property during your life in the event of incapacity by naming a successor trustee when needed.
6. Financial Management. The act of funding a trust often causes people to consolidate their assets providing for easier management in the future both for them and for whoever will take over upon their incapacity or death.

These are a few of the non-tax reasons to use a trust. While an estate under $5 million is not subject to federal estate taxes, depending on where the individual lives, it might be subject to state estate taxation, in which case certain trusts might be used to minimize such taxes.

 

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