Trusts are Better than Wills

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Why a Trust is Often a Smarter Choice Than a Will

While a Last Will and Testament is an essential foundational document, for many families, a revocable living trust is a far more powerful and effective tool. A trust provides a level of control, privacy, and protection that a will simply cannot match. For most middle-class families and virtually all high-net-worth families, a trust is not just a better option—it’s a less expensive and more secure one in the long run.

Key Advantages of a Trust Over a Will

  • It Avoids Probate: A will must go through the public, time-consuming, and expensive court process known as probate. In North Carolina, the court fees for a $1 million estate can be around $6,000, an expense that a trust completely avoids.
  • It Ensures Privacy: A will becomes a public record once it is probated. A trust is a private contract, keeping your family’s financial affairs confidential.
  • It Deters Legal Challenges: A will can be challenged in court, and the legal fees for both sides are often paid from the estate itself, incentivizing disputes. A trust is a private contract that is much more difficult to contest, and a well-drafted trust includes a “no contest” clause that disinherits anyone who challenges it.
  • It Manages Out-of-State Property: If you own real estate in another state, a will requires a separate, costly probate process in that state. A trust avoids this entirely.

Powerful Protection for Your Loved Ones

Beyond the administrative benefits, a trust allows you to build a protective shield around the inheritance you leave for your family. This is especially critical in common family situations:

  • Protecting from Remarriage: Statistics show that most men who are widowed will remarry. A trust can ensure that the assets you leave for your surviving spouse are protected for your children, rather than potentially going to a new spouse.
  • Protecting from a Child’s Divorce: You can leave your child’s inheritance in a trust that they control as trustee. This keeps the assets separate from their marital property, protecting it from being divided in a potential divorce.
  • Protecting from a Long-Term Care Crisis: A trust can be structured to protect assets for a surviving spouse if you require long-term care. A specialized trust within a will, often called a “modified sweetheart” plan, can be a crucial part of qualifying for benefits like Medicaid for long-term care while preserving assets for your family.

A Critical Warning About Outdated Trusts

If your trust was created 10-15 years ago, it is likely dangerously outdated. At that time, the federal estate tax exemption was much lower, and trusts were designed to avoid estate taxes. Today, with the exemption over $13 million per person, these old plans can create a significant income tax problem for your heirs, as they may prevent assets from receiving a “step-up in basis” and trigger a large capital gains tax bill.

Modern planning for your estate focuses on minimizing income taxes for your beneficiaries, a shift that requires a review of any older documents. Call our office at (919) 256-7000 to schedule a consultation.