What will happen to your assets when you die?
It is a big question, yet it is one for which far too few Americans have a solid answer. That was revealed in a 2020 Gallup survey, which showed that only 46% of American adults have a – or any estate planning – that defines what will happen to their estate upon their passing. This creates a problem. Without defining what will happen to your estate, you will die “interstate,” meaning an Ohio Probate Court ultimately determines how your estate is distributed.
In other words – you lose control.
You probably do not want that to happen, which is why you are considering setting up some form of estate plan. That consideration has left you with two options – a Last Will and Testament, commonly referred to as a Will, or creating a Trust. You are asking yourself, which is the best for your situation? Here, we dig into the battle of Will versus Trust options to help you make the right choice for your estate.
What Is a Will?
The Ohio State Bar Association clearly defines what a Will is. It defines a Will as a document “that sets forth how a person would like to have his or her probate property distributed upon death.” To create a Will, you need to be at least 18 years old and of sound mind, meaning there are no mental issues at play that could lead to you making decisions you otherwise would not make.
So, how does a Will work?
Think of a Will as a way for you to define who administers – or “executes” – your final wishes upon your death. As the Will-maker, you nominate an Executor to ensure your beneficiaries receive whatever you give them as part of the Last Will and Testament. This process of administration is lengthy and involves a Probate Court proceeding. The process is highly structured and governed by statutes of the Court. Once this proceeding is complete, the beneficiary leaves with their entire inheritance without conditions, restrictions, or contingency plans for unforeseen circumstances such as creditors, bankruptcy, divorce, or incapacitation. Typically, families find the probate process overwhelming and find it necessary to engage the services of an experienced Probate Attorney to assist with the myriad of required legal filings and nuances of the Court.
Wills Must Go Through Probate
Probate refers to the court-supervised legal proceedings required for specific types of property or assets upon your death, dubbed “probate property.” Generally, this covers any property that is titled under your name and does not automatically transfer to somebody else upon your passing. The process is designed so that claims, taxes, and expenses related to the decedent’s property are handled properly and their assets are distributed according to their wishes.
Wills and Probate courts go hand-in-hand – every Will is subject to the probate procedure. In Ohio, a Probate Court typically charges between a $200 and $500 filing fee for this process. However, additional costs come with probate, such as attorney fees, fiduciary fees, required insurance and bonds, and so on. The costs add up quickly. For instance, the decedent’s assets may require an appraisal before being distributed, which must be carried out by an appraiser recognized by the Court and can cost anywhere between $100 and $5,000 per asset, depending on the asset.
Fees related to administering a Will can become complex. The Court regulates these fees. The Hamilton County Probate Court offers a fee calculator that can help determine how much the estate will pay to attorney and fiduciary fees. Depending on the complexity of the administration, extraordinary fees, and compensation may be requested by Motion to the Court. As you can see, fees associated with this process can be pretty high. A Trust administration can cut these costs significantly and keep the Court’s oversight out entirely.
In short, probate costs money, as does the entire process of executing a Will. A Trust allows you to save on some of these costs, as well as on the time required for court proceedings – probate often takes more than six months to complete.
The Public Record Problem
After making a Will, the testator – i.e., you as the Will-maker – or somebody representing the testator usually deposits that Will to the offices of the Probate Court judge that oversees the county in which you live. It will stay there until you pass away, and an application for probate is filed to enforce the Will.
At this point, the Will becomes a public record once a probate application is filed. It becomes viewable to anybody who wishes to see it, including individuals, businesses, and government entities. Requests to view a public record do not have to be written, as the request can be made by phone, email, or in person at the relevant office. Most records are available now through online record searches that can be accessed through your laptop or smartphone. The requester does not have to identify themselves when making the request.
The Fraud and Scammer Challenge
Wills being on the public record create another issue—the possibility of scams. In 2022 alone, the Federal Trade Commission received 2,762 reports of probate and inheritance scams, with losses totaling around $70 million for that year.
These scams can take many forms, such as somebody claiming to be a bank-assigned executor, a creditor who holds a debt against the deceased or their real estate, or even a distant or newly claimed relative of the decedent. All it takes is for the scammer to sound authentic to get them to open the door for fraud to occur.
What Is a Trust?
A Trust exists when you – as a “Grantor” or “Settler” – create a trust vehicle through which you give a property or asset to another person during or after death, known as a “Trustee,” to manage. That Trustee oversees the property on behalf of whoever you assign as a beneficiary of the Trust you create. In estate planning, a revocable living Trust is the most common of these vehicles. These Trusts allow you to amend or even revoke the Trust at any point during your lifetime. It is also possible to create irrevocable Trusts, but changes to this type of Trust are limited once it is in place. Irrevocable Trusts are often used as advanced and specific planning to protect a person’s wealth from potential creditors or future nursing care costs.
What You Need to Know About a Trust
The critical question is, what is the advantage of a Trust versus a Will? Several factors combine to make a compelling case that a Trust may be the better option for somebody living in Ohio.
No Probate or Court Proceedings
Assets held within a living Trust are not subject to the probate process enforced on a Will. That means a Trustee does not need to apply to the Probate Court to transfer assets to beneficiaries based on the conditions written into the Trust. This leads to lower costs, total privacy, and less time for administration.
The caveat here is that you assign title or beneficiary designation to Trust. If an asset – such as a property in your name – is not part of the Trust, it must go through the probate process.
More Control, Even After You Pass Away
Trusts also give you more control than a Will in terms of how and when your assets are distributed. Through a Trust, you can dictate how the estate funds held are distributed to the beneficiary, including when they are paid out and any conditions attached to those distributions. For instance, you could dedicate a portion of the Trust to a minor or younger beneficiary on the condition that they only receive their payout if they enroll in college. Alternatively, you could specify the direct distribution of the assets to older children to ensure nobody has to wait or go through any complicated legal .
Delaying immediate and outright distributions through a Trust is a significant benefit for spendthrift beneficiaries who are not financially responsible or set to inherit due to potential creditors or bankruptcy.
Trusts can also protect beneficiaries whose disability benefits and similar assistance-based awards might be disrupted by the inheritance via a Will through the probate proceeding, which is a direct distribution to the beneficiary without regard for potential loss or consequences of the assistance.
Another example is when leaving assets to a married beneficiary. A Trust enables the beneficiary to eliminate concerns related to comingled accounts, ensuring assets left in the Trust are protected during separation or divorce.
Will or Trust – Make Your Choice
In the battle of Will versus Trust, the Trust often comes out on top because of the lack of need for a probate process and the higher degree of control you have over what happens to your assets when you die. That is not to say that a Will is not an option for estate planning – and, in some cases, you can have both a Will and a Trust in place. However, it is essential to be aware there are more complex estate planning vehicles than just a Will. To learn what is best for your family, you must meet with an attorney and discuss your goals and family dynamics to determine the best course of action.
Now, you face a choice: Will or Trust? If you need help making that choice, Chris Diedling is a Wills and Trusts attorney who can provide more information about both options and help you set up the best estate plan.
Contact Chris Diedling Law or call 513-672-6122 to schedule a free consultation.