Click here for a chart comparing a Revocable Trust and a Will:
Comparison: Revocable Trust vs. Will
Avoiding Probate. Many folks believe that, if they have a Will, the assets they own at death won't have to be transferred through the probate process. This misconception comes from the mistaken belief that only dying without a Will requires the involvement of the Probate Court, when, in fact, dying with a Will subjects heirs to the same probate process as dying without a Will (called dying "intestate.")
The only difference between dying with a Will and dying intestate is that, in the latter, state law dictates how the assets are distributed to heirs. Unless assets are held jointly or have beneficiary designations associated with them (such as life insurance or IRAs), assets passing by Will must be transferred through probate. Consequently, a Will requires probate--it doesn't eliminate it.
Providing For Minor Children and Young Adults. No planning vehicle is better than a Revocable Trust for minor children or young adults. Whenever prudent planning calls for assets to be held in trust to assure proper management and distribution of the assets, it is far more efficient and much less costly to establish such trusts for beneficiaries under the terms of a Revocable Trust. Although trusts for beneficiaries can be established by your Personal Representative under a Will, trusts created by Will are 1) subject to the oversight and control of the Probate Court, 2) open to public view, and, 3) are more likely to be challenged by disgruntled family members.
Minimizing Potential Challenges and Claims Against Your Estate. Assets passing to heirs by Will are more readily subject to the claims of creditors than assets transferred by a Trustee under a Revocable Trust. That's because the probate process is designed to give creditors an opportunity to enter claims against your estate. In fact, probate originated many years ago as a legal procedure established primarily for the purpose of making the assets of a deceased person available to his or her creditors.
Any person can file a claim against your estate simply by submitting a claim to the Clerk of Court. Once a claim received, the claimant is entitled to a hearing to determine whether or not the claim must be paid.
While the Trustee under a Revocable Trust can be compelled in court proceedings to pay claims of creditors, the court proceedings would have to be initiated (that is, a suit would have to be filed) by the claimant, since nosuch proceedings (probate) is started or necessary with a properly funded Revocable Trust. Therefore, the claimant must assume the burden and cost of initiating the lawsuit. For that reason, it's less likely that a claim will be made against your estate if the assets are held in a Revocable Trust.
Planning for Incapacity. This is where a Revocable Trust is far superior to a Will as an estate plan. If you choose Will planning to transfer assets on death, you need to create a plan for managing assets during a period of incapacity--a critical planning element not covered by a Will. If you choose a Will as the basis for your estate plan, it is very important to give an Agent under a Power of Attorney broad authority to manage your assets in the event of incapacity. Such a broad grant of authority--with no instructions as to how that authority is to be used--can be unsettling, but is a necessary part of the Will planning process.
By comparison, a properly drafted Revocable Trust authorizes your Successor Trustee to take charge of your affairs and contains specific instructions as to how assets are to be managed and distributed during a period of incapacity. There is no need to rely on a Power of Attorney to manage your affairs. Under North Carolina law, a Power of Attorney must be made a public record by recording in the Registry of Deeds before the Agent has authority to act. As with the probate process, this leads to public disclosure of private facts--something that most families wish to avoid. There is no requirement that a Revocable Trust be recorded, and that means your
family's affairs remain private.
Finally, the authority granted to an Agent under a Power of Attorney is frequently questioned by financial institutions and others, particularly if the Power of Attorney is more than 6 months old (perhaps because the institutions recognize that Powers of Attorney typically are issued as a matter of course and contain no instructions as to80 how the assets are to be managed).
By comparison, the authority of a Successor Trustee to manage assets held in the name of a Revocable Trust is rarely questioned (it's never happened in my practice). I attribute this recognition of authority granted to the Successor Trustee of a Revocable Trust to the fact that the creator of the trust has taken the time to consider whom they want to serve as their Successor Trustee, has knowingly given the Successor Trustee control of the assets by transferring them to the Revocable Trust, and, in some cases, has given specific directions to the Successor Trustee for the management and distribution of those assets.
Can the Terms of a Revocable Trust Easily Be Changed? Yes. As your family situation or financial circumstances change it may be necessary to modify your estate plan. A properly established Revocable Trust easily can be amended to meet your planning needs. The estate plans that we prepare for our clients are organized in a three-ring notebook to allow for ease of amendment at a relatively low cost.