The big question is never if you need a plan for estate planning – it’s which tools you will use. For families and high-net-worth people, this decision usually leaves only two basic choices: a trust or a will.
Both are channels for transferring wealth, yet the two have some clear differences, especially when your estate is complicated or your privacy is of paramount consideration.
It comes down to understanding who stands to gain more – whether that is a trust or a will – by looking at what each can do and what place does it have in the bigger wealth governance picture.
Trusts vs. Wills: The Basics
A will is a straightforward document instructing you how to dispose of assets after your death. This includes who will be appointed the executor of this process, and may include provisions regarding guardianship for any minor children that you have.
However, a will does not protect your estate from the probate process, a public, sometimes costly and time-consuming legal procedure. A trust, conversely, skips probate altogether.
Establishing a trust means you hand your assets to the trust itself, run by a trustee. It’s a separate legal entity from you so it can work without you – whether you’re disabled or pass away.
A trust can be a revocable trust, where you can change your mind, or an irrevocable trust, which holds your plans in place. But either way, it provides more benefits than a will.
Privacy and Discretion
Privacy is non-negotiable for many ultra-high-net-worth individuals (UHNWIs) and high-net-worth individuals (HNWIs). A will becomes public record during probate. Your estate’s specifics – what you owned, who got what, and when – are easily visible to anybody. Trusts do away with this vulnerability.
The terms are private with a trust. The inheritances your beneficiaries receive are discreet, the wealth is kept hidden away from prying eyes. If you have estate assets of any kind that are sensitive, high value, or subject to business interests that demand confidentiality, this is particularly valuable.
Complexity Requires Flexibility
Complex estates are another reason to think about a trust instead of a will. A trust is right for you if your wealth is spread out over several states, if you have a lot of business investments, or if you have a lot of money in retirement accounts.
Let’s look at a family business. To keep the business going, a trust lets you set clear rules for how it will be run, protecting it from bad management or claims from outsiders.
Using a trust structure that can handle laws from one nation to the next without any tax or legal complications, one may also support assets located abroad.
Avoiding Probate: Time Is Money
For most people, probate is a legal hurdle, not to mention a financial one. Attorneys, courts, and appraisers can eat up your money and diminish what your beneficiaries receive.
Probate also takes time. Estate settlement is not quick – it’s not uncommon for estates to languish for months or even years, which keeps the money, property, or other assets you might need from your family.
Trusts are such that they do not have to go through probate. Assets held in a trust go to beneficiaries without court involvement and therefore time and money are saved. This efficiency is invaluable when it comes to UHNWIs where even the smallest of delays can cost monumental amounts.
When a Trust Outweighs a Will
Who really needs a trust instead of a will? Your goals and the specifics of your wealth will tell you the answer.
High-Value Estates and Tax Planning
A trust is generally indispensable for people with estates that exceed the federal estate tax exemption (which is $13.61 million as of 2024). Careful planning enables trusts to be structured so as to reduce (and even eliminate) estate taxes.
For instance, irrevocable life insurance trusts (ILITs) remove insurance proceeds from your taxable estate. That way, more wealth gets to your heirs.
Another layer of protection would be credit shelter trusts, which permit spouses to transfer assets tax-free so that exemptions apply to future generations. Families looking to preserve wealth over the span of multiple lifetimes need these tools.
International Assets
Global solutions are needed for global wealth. Probate laws vary greatly across jurisdictions, so a will often fails to include assets held in several countries. Trusts, on the other hand, can put these holdings together under a single structure.
With our international network, your trust is in lockstep with the laws and regulations of every country in which your assets are held. Such a structure would eliminate potential conflicts or double taxation and would, to the largest extent possible, enjoy the benefits of each jurisdiction.
Protection Against Legal Threats
The best way to protect someone who might get sued, such as a business owner, doctor, or other person who is exposed to the public, is in a trust. Asset protection trusts (especially if set up outside of the United States) shield your money from creditors, lawsuits, and in some states even divorce settlements.
Unlike a will, which allocates your assets, a well-drafted trust will protect your assets. Dominion’s trusts are written with impenetrable clauses that mean even if you’re taken to court over your funds, they are untouchable.
Addressing Incapacity
Estate planning is not only about death but about life. When you become incapacitated, who makes the financial decisions? A will comes into play only after you pass, as it has no authority until then. But a trust operates instantly, with the trustee you want stepping in to manage assets how you want.
This seamless transfer guarantees that your money is handled free from judicial delays or mishandlers. This preserves your legacy and your interests.
Types of Trusts for Strategic Wealth Governance
There is no one-size-fits-all trust. They each have their own purpose and thus it is important to know which one to choose. A well-structured trust is based upon your particular financial goals of flexibility, protection, or philanthropic impact. Consider the following types to see which is right for you.
Revocable Trusts
In terms of managing money for yourself and for your loved ones after your death, these are perfect – they are flexible and amendable. So, if you want control of the assets should you become incapacitated or have an unexpected life change on the horizon, they are very simple to access and to change, therefore ideal for you.
Irrevocable Trusts
The pillar of asset protection, these immovable trusts provide the best defense against taxes, litigation, and claims. When you create an irrevocable trust, you give up control of the assets and benefit from the resulting legal protection related to creditor actions or estate tax obligations.
Spendthrift Trusts
These trusts are designed to disburse the wealth in a slow manner; hence, they will prevent the beneficiaries from wasting their inheritance. As such, they’re particularly helpful when those benefiting from the trust are without financial discipline or very young, assuring the money is spent in a trustworthy way over time.
Special Needs Trusts
Special needs trusts make sure that disabled beneficiaries will receive financial support without losing eligibility for government help. They guarantee financial security and add Medicaid or Supplemental Security Income (SSI) program access.
Charitable Trusts
These trusts are perfect for those who have philanthropic goals and want to get tax benefits to do so, and they support causes you care about. Structured correctly, they can create income during your lifetime and a legacy of giving while preserving financial advantages.
Credit Shelter Trusts
These trusts are devised to eliminate or minimize estate tax for married couples such that wealth could truly be passed on to the next generation tax-free. They also provide financial needs for surviving spouses.
You can customize each type of trust to suit your estate’s needs. At Dominion, we are experts in creating tailored strategies that match your desires. It doesn’t matter if you’re focused on wealth preservation, support of your family, or building a legacy – our skills guarantee that your trust is the cornerstone of your financial future.
Disadvantages of Trusts
Trusts, of course, have many great advantages. But there are shortcomings, as well. Drafting a will takes more effort and cost to set up than setting up a trust.
A process that must be precise to avoid gaps requires the assets to be retitled into trust. You need to manage trusts, however, and will have to stay on top of them in order to meet compliance targets and fulfill fiduciary duty.
While there are cons associated with trusts, as long as you have the assets or complex estates, the pros are much greater. The upfront cost you pay guarantees your safety, your privacy, and your control of your wealth forever, which is the reason it is so important to have good wealth government.
For Lasting Wealth, Choose a Dominion Trust
We don’t just create trusts – we build wealth governance systems that will last. Contact us today, and we’ll show you how we can protect your legacy and ensure your financial future. Establish enduring wealth with Dominion.
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