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Trust vs. Will: Which One is Right for You?
Sarah and Tom had always been responsible with their finances. They saved diligently, paid off their mortgage early, and even drafted a will shortly after
their second child was born. They believed they had done everything necessary to ensure a smooth transition of assets should something happen to one of them. But when Tom suddenly passed away in a car accident, Sarah was blindsided by the complexity and costs of the probate process.
Tom’s will had been written with the best of intentions—he had named Sarah as the primary beneficiary and their children as secondary beneficiaries. But what they hadn’t anticipated was the long, drawn-out legal process that followed. Probate court required months of hearings, costly legal fees, and public disclosure of their assets before Sarah could gain full control over what Tom had left behind. In the meantime, certain accounts were frozen, and Sarah had to scramble to cover everyday expenses.
The experience made her wonder—was there a better way?
Understanding the Differences: Wills vs. Trusts
What is a Will?
A will is a legal document that outlines your wishes regarding asset distribution, guardianship of minor children, and your choice of executor. It is one of the most basic estate planning tools, but it comes with limitations that many people overlook.
- Wills must go through probate. This is the legal process of validating the will in court, which can take months or even years depending on the complexity of the estate.
- Probate is public. This means anyone can access the details of your estate, including nosy neighbors or potential scammers.
- A will does not help with incapacity. If you become incapacitated before passing away, your will does nothing to manage your assets or finances.
What is a Trust?
A trust, on the other hand, allows you to place your assets under the management of a trustee, who is responsible for distributing them according to your wishes. Unlike a will, a trust:
- Avoids probate entirely, allowing beneficiaries to receive their inheritance quickly.
- Provides privacy, as trusts do not go through the public court system.
- Can specify conditions for inheritance, which is especially useful for minor children or beneficiaries who may not be financially responsible.
- Can provide for you during your lifetime, in case of illness or incapacity.
Which One is Right for You?
The choice between a will and a trust depends on your specific needs and goals. If you have few assets and want a simple, straightforward way to pass them on, a will may be sufficient. However, if you want to avoid probate, protect your privacy, and ensure your assets are distributed exactly as you wish, a trust is often the better choice.
Sarah learned this lesson the hard way. After struggling through probate, she decided to set up a trust for her children, ensuring that they wouldn’t face the same hurdles when she passed. You don’t have to wait for a crisis to make the right decision—schedule a consultation with Raulston & Associates today.
Asset Division In Divorce
When the legal state of marriage is ended by divorce, legal commitments by the couple – property, debts and more – must be resolved. While laws vary by state, the divorce process generally involves distinguishing ‘community property’ that was jointly owned by the couple from ‘non-community property’ owned by just one person. Property may mean real property, like a house, but also business, financial and other assets. Couples may divide their property and debts themselves; if they are unable to, the court presiding over the divorce may use state laws for the division. While children are not ‘property’, divorce proceedings require addressing custody, visitation and financial support if there are children. If the couple owned a house, neither has an automatic right to evict the other until ownership of that is decided as well. Asset division can be complicated and emotional, and legal advice is frequently required.
Alternatives To Litigation
While there’s no concrete answer to how long a lawsuit process might take in court, US cases take over a year on average, and cases running 5 or more years are not unheard of. The load of cases before state courts has increased over time, and staffing has not. Statistically, most litigation is not completed by a court decision, but settled out of court. How long cases take to reach settlement is also unpredictable. Mediation and arbitration are common routes to settle outside litigation. In mediation, the parties engage an independent 3rd party to facilitate settlement – but settlement is typically voluntary. In arbitration, the parties agree to be heard by an independent, qualified arbitrator, and to abide by the decision of the arbitrator.
What is Litigation?
In US law, one party can bring a lawsuit against another party in court. In civil cases, the party bringing the suit — called the plaintiff — generally claims to have incurred loss through actions of the other party – the defendant. In criminal cases, the state — whose legal representative is called ‘the prosecution’ — charges the defendant with breaking the law. The court decides the case; judgement may include remedy of the loss and damages in civil cases, or sentencing in criminal cases, plus injunctions to force action and other legal consequences. The overall conduct of a lawsuit is called ‘litigation.’ The parties on both sides are generically ‘litigants’, and the attorneys who represent them are ‘litigators.’
Rent-To-Own Agreements
Picture this agreement between two players in a board game: ‘If you land on my property 10 times, pay $5 more each time, and then you can buy it for $200.’ The first player still owns the property for those 10 turns, but the second player has secured a set price and (potentially) first-in-line status to buy. It’s more complicated than just paying rent, and it has a different set of risks than just selling and buying. The final deal is set in the future, and is less predictable. These two players have basically constructed a rent-to-own agreement. They have a rental agreement, with an option-to-buy agreement attached. Rent-to-own agreements are used in the real world as well, for things ranging from cars to buildings. Rent-to-own gives parties a different set of tools and risks to reach agreement. They can be complex, and legal advice may be prudent.
Rental Application Rights
A landlord renting a property has rights in selecting a tenant. Tenants also have rights about the factors that can be considered in selection. While most landlord-tenant issues are governed by states and localities, Federal fair housing laws apply to tenant selection. Landlords must apply legal selection standards equally to all applicants. Tenant applications can’t be rejected based on race, color, religion, age, sex, national origin, family status, or mental or physical disability. Written rental applications are not required by law, but they give a basis for fair and consistent screening. If a rejected tenant challenges the decision, documentation of a justifiable decision may negate the challenge.
Eviction Rights and Rules
The conditions and steps involved in a landlord forcing a tenant to leave a rented property – ‘eviction’ – are defined by state and local laws. As both landlord and tenants have legal rights, eviction requires methodical and documented steps. Unpaid rent would seem like a common and simple cause for eviction, but tenants have rights even in this case. These rights may include a period of notice, and an opportunity to catch up on rent payments. Other causes – such as destructive behavior or repeated noise – also require a methodical approach. Did the landlord and tenant agree to certain conduct in the lease agreement? Are there witnesses or documentation of behavior or results? Generally, eviction starts with written notice. Some notices such as ‘cure or quit’ notices allow tenants a short time to address issues. ‘Unconditional quit’ notice is typically reserved for repeat cause or serious infringement. The rules for eviction are detailed and can be strict. When in doubt, get experienced legal advice.
Understanding Tenant Rights
Renting home or business space from an owner comes with legal rights and responsibilities. The landlord can’t do ‘anything they want’, and neither can the tenant. Federal, state and local laws all apply. Under the Federal Fair Housing Act, tenant applications can’t be rejected based on race, color, religion, age, sex, national origin, family status, or mental or physical disability. The Federal Fair Credit Reporting Act requires landlords to advise that tenants can request a credit report if they are rejected based on a credit check. State and local codes usually cover property, contract issues and landlord conduct. A safe, habitable building is one of the key property rights applicable to tenants. Other codes cover tenant-landlord contracts, including security deposits, interest, return dates, and in some cases, even rental rates. Rental arrangements should always be documented in writing, and tenants are entitled to copies of the documents. Conditions for ending rental are usually defined in laws as well — and even eviction conditions. It’s advisable for a tenant to document everything – including photos of property condition – to minimize disputes with facts should something arise.
Landlord Rights & Responsibilities
A landlord owns property that is rented or leased to someone else – the ‘tenant’ or ‘lessee.’ Both responsibilities and rights for landlords are defined by law – usually state and local codes in the US. Responsibilities for landlords may cover property, contract, and tenant issues. Rented properties must meet safety requirements and other municipal codes, as well as safe and livable ‘habitability.’ Contract terms including price, late penalties, contract length, and cancellation notice are also frequently defined by law. Likewise, tenant selection, treatment and eviction requirements are often spelled out by applicable regulations. Landlord responsibilities are different from property ownership. State and local laws define the ‘game rules’ under which landlords and tenants work together.
What is an S Corporation?
In US law, corporations are organizations authorized to act as a legal entity. US and state tax laws allow a special ‘S Corporation’ tax status that changes how corporate taxes are handled. The government taxes regular ‘C’ corporations directly on their profits, under corporation-specific laws. Individual income tax only applies to money that owners receive from the corporation, such as salaries and dividends. ‘S’ corporations do not pay taxes directly. Their profits or losses ‘pass through’ to the owners’ personal tax returns. This makes them similar to LLCs tax-wise. S status can be ‘elected’ by the shareholders, if the restrictions for S corp status are met. S corps can also un-elect S-corporation status, and revert to ordinary ‘C’ corporation taxes.
