5 reasons to add a trust to your will

Think setting up a trust is just for the well-to-do? Think again.

Even if they haven't written one yet, most people realize they need a will to ensure the assets they leave behind are distributed to beneficiaries according to their wishes, such as children or charities.

But for many people, a will alone is not enough. "A trust gives you more control to specify how your assets will be distributed and managed," says Ari M. Moore, a former estate planning attorney-turned personal trust officer at Bank of Oklahoma Private Wealth.

“Trusts also avoid the costs and delay of filing the will in probate court while providing more privacy,” she adds.

Moore outlines five reasons you may want to consider a revocable trust in your estate planning:

1. Get your assets to the right people
Just like a will, a revocable trust can help you and your spouse direct assets to the intended people once you pass away. “You can have a will without a trust but if you have a trust, it is critical for you to also have a pour-over will directing the court to transfer remaining assets to your trust,” says Moore. You also typically still want a will to nominate a guardian for minor children, but "a revocable trust usually becomes the backbone of the plan to transfer assets," Moore says.

2. Avoid probate
Probate is a legal process to distribute assets when someone dies. It is the court's system to review the deceased's assets, pay debts and distribute what remains to persons or entities named in the decedent’s will or in accordance with applicable intestate law. Probate can be a lengthy and costly process—averaging six months to several years, depending on the complexity of the estate. Payment for court and legal fees is typically taken from the estate.

It is important to note, however, if you fail to update beneficiary designations or transfer any assets into your trust prior to your death, probate will likely still be required to distribute those assets pursuant to intestate law or your prior estate plan. And, depending on whether you also have that pour-over will ensuring your trust’s plan for wealth transfer is carried out, the probate assets could be distributed in a manner other than your stated desire under your trust (ultimately based on the language of your state law if no will is in place).

"Probate isn’t necessarily a bad thing, for example, if you have an asset that is not titled to your trust, that pour-over will directs the court to distribute your assets to your trust, which very likely differs from the manner in which intestate law would distribute your assets,” says Moore. “What gets people most concerned about probate are the attorney's fees and the public disclosure of what the decedent owned," Moore continues.

3. Create a plan for incapacity
We often think of a will or trust for when we pass away. But what if you have a debilitating illness, get into an accident, or experience aging that impacts your cognitive and physical abilities, and you're left unable to manage your finances, medical needs, and your home?

You can create a power of attorney (POA) to appoint someone (called your "attorney-in-fact") to manage your financial affairs, but Moore says a trust can provide more effective direction to your trustee to make decisions on your behalf in the event of your incapacity.

4. Gives the grantor more control
A revocable trust lets you decide not only to whom your assets will go to, but also when they will receive them and how they can use them.

"A trust helps the grantor retain control of their assets with strings from the grave," Moore explains.

For example, if someone in the family is financially irresponsible, you can state in the trust that the assets be given to them in small amounts over time. If a beneficiary is a minor, the assets can go to them at a certain age or under certain conditions, such as upon achieving college graduation. If the beneficiary is a person with a disability, you can state that the assets be distributed for their care.

5. Protect your beneficiaries
"When set up correctly, a trust can prevent your beneficiaries' inheritance from being subject to creditors, lawsuits and other potential risks," Moore continues. For example, if your beneficiary is sued or divorced, the trust's assets that remain separate property and are held in trust may be sheltered.

Additionally, because a trust is private agreement, the identities of your beneficiaries are not publicly disclosed, reducing the risk that they can be targets for scammers.

Other concerns regarding trusts
Keep in mind that trusts aren't for everyone. You may not need a trust if you have a small estate or can effectively divide your estate by writing a will and properly titling your assets to transfer automatically upon death. However, having a trust can help you address key concerns about the distribution and management of your estate.

“One of the key elements of estate planning is getting your ducks in a row in relation to the various advisors involved—estate planning attorney, your accountant and your bank.”

- Ari Moore, personal trust officer at Bank of Oklahoma Private Wealth

When you name a trustee, it's important they know what assets you have and that they are comfortable administering them. Most corporate trustees have no problem administering trusts with typical asset management of stocks, bonds and mutual funds.

However, corporate trustees can run into challenges with assets requiring more specialization, including things like real estate, minerals or business assets, so make sure they know what they are getting into by having documentation related to all assets and entities in one place.

It is advisable to meet with your named trustee or successor trustees and discuss your trust prior to finalizing your estate plan, Moore suggests. "That organization can be a huge help to your trustee and your beneficiaries down the line."

What's the difference?

Once you decide whether you want a will, or a will and trust combo, you, your family and your beneficiaries will have peace of mind that after you pass, your lifetime of assets and legacy will live on the way you intended.

Learn more about Bank of Oklahoma Private Wealth's trust services.