Should you create a will based estate plan or a trust based estate plan? It depends on your goals. While a will and a trust serve some of the same functions, some of the major differences become apparent when you examine how each is administered. A will must be entered into probate. Probate is a court proceeding, which means that documents filed during that court proceeding become public record. This means that when a person's will is admitted to probate, it becomes a public record, just as we saw in Joe Paterno's case. On the other hand, trusts do not need to be admitted to probate. This is because if a trust is properly funded (meaning a person's assets are all transferred into their trust) then probate is unnecessary. One of the major purposes of probate is to effectuate the transfer of property from the deceased to his or her heirs. By using a trust, probate can be avoided since the deceased already transferred property out of his or her own name and into the name of the trust. Once a person who has a trust passes, the terms of the trust take over and the deceased's property is transferred according to the terms of the trust.
Any estate planning lawyer worth their salt will always inform clients that a trust is the best possible option. However, if someone decides to go with a will based estate plan, here is an explanation for “Dummies” about one needs to know about probate:
Probate is a term that is used in several different ways. Probate can refer to the act of presenting a will to a court officer for filing — such as, to “probate” a will. But in a more general sense, probate refers to the method by which your estate is administered and processed through the legal system after you die.
The probate process helps you transfer your estate in an orderly and supervised manner. Your estate must be dispersed in a certain manner (your debts and taxes paid before your beneficiaries receive their inheritance, for example). Think of the probate process as the “script” that guides the orderly transfer of your estate according to the rules. (For more info, see What’s a Probate Estate All About?)
Many people think that probate applies to you only if you have a will. Wrong! Your estate will be probated whether or not you have a will.
•With a valid will: If you have a valid will, then your will determines how your estate is transferred during probate and to whom.
•Without a valid will: If you don't have a will, or if you die partially intestate, where only part of your estate is covered by a valid will, the laws where you live specify who gets what parts of your estate.