When planning for the future, many people are unsure whether to set up a will, a trust, or both. While both tools provide a means to pass assets to loved ones but their differences are important, especially in Michigan. Every day, we’ve seen firsthand how making the right choice can impact families for generations. Let’s break down the differences between a will and a trust, and why choosing the right one is crucial for Michiganders.
What is a Will?
A will is a legal document that outlines how you want your assets to be distributed after your death. It’s a simple and often cost-effective way to make your wishes known. In Michigan, wills must go through probate court—a court process that verifies the document and ensures debts are paid before assets are distributed. Therefore if your heirs have to rely on your will to transfer your wealth, your heirs will be required to go to court.
Most individuals do not realize that wills must go through probate court. Probate court is an expensive, public, and time consuming endeavor. The main goal in estate planning should be to avoid probate court, therefore, a will may not be the adequate tool to accomplish most individuals’ estate planning needs.
The author currently has a client, who passed away with just a will in place. The client used the Michigan Statutory Will as a template and wrote various modifications to the will. Her estate had to go through probate, which will likely take longer than a year to finalize. The delay was a surprise to her family, who didn’t realize probate could be such a lengthy process. In addition to the lengthy process, our attorneys had to present an argument to the probate court judge because the will had ambiguous teams and was not properly drafted. There were additional expenses and headaches because the will was drafted without the assistance of an estate planning attorney. While probate isn’t always overly burdensome, it’s an important to work with an expert to avoid confusion and save expenses for families deciding between a will and a trust.
What is a Trust?
A trust is a legal arrangement where a trustee holds and manages assets on behalf of beneficiaries. There are several types of trusts, but the most common is a revocable living trust. Unlike a will, assets placed in a trust can avoid probate, which can save time and money.
Our attorneys recently worked with a couple who set up a trust to ensure their cottage in Traverse City would remain in the family without any probate delays. They wanted their children to have immediate access to the property after their passing, and the trust allowed for a smooth transition. One of the key benefits of a trust is that it remains private, while probate records from a will are public.
Key Differences in Michigan
Probate Process
- Will: Goes through probate, which can be time-consuming and costly. In Michigan, even a small estate must typically go through this process unless it qualifies for a simplified procedure. See our article on the small estate procedure here.
- Trust: Avoids probate entirely if drafted and administered correctly, meaning your assets can be transferred quickly and privately to beneficiaries.
Protection
- Will: Offers limited protection for children, heirs and beneficiaries.
- Trust: Can be drafted to include protections and restrictions on inheritances for young children, special needs beneficiaries, or spendthrift beneficiaries. The Trust can also include language to safeguard inheritances in the event of a beneficiary’s divorce, bankruptcy, incarceration, addiction to drugs, etc.
Cost:
- Will: Generally less expensive upfront but probate costs can add up after death.
- Trust: More expensive to set up due to the complexity, but it often saves money in the long run by avoiding probate fees.
Flexibility and Control:
- Will: You can change your will easily, but it only takes effect after you pass away.
- Trust: You can also change a revocable trust during your lifetime, and it takes effect immediately, allowing you to manage assets while you’re alive.
Privacy
- Will: Becomes part of the public record once it goes through probate.
- Trust: Remains private, making it a better option if you want to keep your financial affairs confidential.
Which is Right for You?
Deciding between a will and a trust depends on your specific needs and goals. If you have minor children, a will is essential because it allows you to name a guardian. However, if you have assets that will be left to the children such as a house and you want to avoid the probate process, maintain privacy, a trust may be the better choice.
One client of mine, a small business owner in Rochester, opted for a trust because he wanted to ensure his business would continue running smoothly if anything happened to him. Without a trust, his family would have faced a long probate process, which would disrupt the day to day of the business. The trust also allowed the business owner to designate who would manage the business at his disability/death, what ages his children would inherit the business, and ensured a smooth transition.
Final Thoughts
Both wills and trusts have their place in estate planning, and they are not mutually exclusive. Many people in Michigan benefit from having both a will and a trust. For example, you might use a will to designate a guardian for your children and a trust to manage your assets. Consulting with an estate planning attorney is crucial to ensure that your estate plan reflects your unique situation and the Michigan laws that apply.
In the end, the goal is peace of mind. Whether you choose a will, a trust, or both, making these decisions now ensures that your loved ones will be cared for, and your legacy will be handled according to your wishes. It’s a step worth taking—and one that can make all the difference.
This article is meant for informational purposes only. Please recognize that nothing in this article constitutes legal advice. If you have any questions, comments, or seek legal assistance, please contact one of the attorneys at Wakefield Law, P.C.