When to update from a will to a trust

At Haven Life, we’re all about making life insurance less hard. We want to help you provide financial protection for your loved ones in case the worst should happen, which is why we’ve focused on our easy online application process, first-in-class customer service, and constant innovation.

Making life itself less hard is why we offer Haven Life Plus, a suite of bonus services for eligible Haven Term policyholders, designed to help you while you’re still living. One of those offerings is no-cost trust and will services from the similarly minded Trust & Will, who can help you create a legally binding end-of-life document online in as little as 15 minutes.

Now, most people understand what a will is, but there are situations where you might be better off with a trust. To better learn when to update from a will to a trust, we spoke with Mitch Mitchell, associate counsel, estate planning at Trust & Will, and he gave us some key reasons why you might want to update from a will to a trust. Those reasons are outlined below.

You wish to avoid probate

“Probate avoidance is the number one reason people choose trusts,” says Mitchell. Wills and trusts can both specify who should receive your assets and who should be in charge of carrying out your wishes, but a key difference between them is that wills have to go through probate. What that means, in essence, is that your will has to be assessed by a court before your assets pass to your heirs. This can be a stressful process, and it often lasts longer than you would want.

If you have a trust, however, your assets can pass to your heirs without going through probate. “If you want to be sure someone gets your property and doesn’t have to go to court and wait, fund a trust,” says Mitchell. “It costs more and takes more time to set up, but you do that on the front end so your family doesn’t have to deal with probate when you’re no longer here.”

He adds that “there are several types, but usually what we deal with in estate planning is a revocable living trust. That’s a document you set up while you’re still alive, like a will, but part of the process is transferring ownership of property into the trust, so anything that’s in it when you die doesn’t have to go through probate. With a revocable trust you can still use and manage your assets while alive, but pass them on easily when you die.”

You have property in multiple states

This relates to probate avoidance. “If you have property in multiple states, and you only have a will, your heirs will have to do probate in each of those states,” says Mitchell. “If you do trust planning instead, you can avoid probate on all of those properties.”

Again, Mitchell suggests a revocable trust might be helpful. “The ‘revocable’ part of the trust means you can pull things back out while you’re alive — you can refinance a house or sell it, for example. There’s a whole lot of flexibility while you’re still living.”

You have young children

“If you have minors you want to inherit your property, but you want to stage how they get it, a trust is a good way to go,” says Mitchell.

“If I were to die today and I wanted to my property to go to my young kids, I’d want to make sure their needs are taken care of until their 20s, so I’d want my trustee to play almost a parental role and support them, not give them a lump sum windfall now because they’re not yet old enough to handle it,” he continues.

Name a trusted trustee (and, of course, make sure they’re willing to play this role), and they can manage your assets for your kids until they’re ready to inherit them.

You’re planning for divorce (not yours)

When your children marry, you hope it’ll lead to a lifetime of happiness. But, y’know — stuff happens. And let’s be frank, sometimes good people make bad decisions.

All of which is to say, “if you’re concerned about your child’s future ex-spouse having a claim on your child’s inheritance in the event of a divorce, you can set up a trust for that child,” instead of just having a will, per Mitchell.

“Maybe you have a daughter and don’t want a future ex-son in law to have a claim on your property in a divorce,” he says. “With a trust, your child doesn’t technically own your property and is only able to access it in certain circumstances, so it’s potentially not subject to her ex-spouse’s claim in a divorce court.” Note the “potentially.” This is a slightly complex area, so if it might be of interest to you, an estate planning expert can tell you more.

Your family includes someone with special needs and disabilities

“If you have a beneficiary with special needs who requires public benefits” — such as medical care, nursing or supplementary assistance — “often to qualify for public need benefits there are income restrictions, meaning they won’t qualify if they have assets over a certain amount,” says Mitchell.

To give an example of what this means, you might have an heir with special needs who is able to qualify for the government-funded help they require, but would be rendered instantly unqualified for those benefits if they received, say, a property from you via your will. “To avoid that, you can do a special needs or supplemental needs trust with specific language that can be folded into your revocable trust so your heir doesn’t receive a windfall amount that would disqualify them from benefits,” says Mitchell.

Again, it’s complicated, so you might want to speak with a professional for guidance.