This article is intended for educational purposes only and is not legal advice. For guidance on your personal situation, please contact a lawyer.
One of the most uncomfortable things you might have to do in your lifetime is make plans for when you're not around. That could mean buying a burial plot, pre-paying your funeral expenses, and writing up a will that divides your assets among your beneficiaries.
It's a pretty common practice for people to use a will for estate planning purposes. And there's even software that lets you create one online without the help of a lawyer. But as popular as wills might be, they have a major pitfall you should know about.
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The problem with using a will
The benefits of using a will for your estate planning are the simplicity and relatively low cost. Even if you choose to hire an attorney to write up a will, you may find that it's one of the most economical options out there.
But wills come with one major drawback: They're subject to probate. And that alone could be a good reason to avoid using a will to pass assets to your heirs.
Probate is the legal process of proving that a will is valid. It goes through the courts, which means there are fees involved. And often, there are delays -- sometimes extensive ones.
It's not unusual for probate to take months, even when a will is simple and uncontested. And the longer probate takes, the longer it takes for your heirs to get their money.
That's not just an inconvenience, though. It could become a genuine financial hardship.
Let's say you pass away and use a will to leave your home, as well as some funds in an account, to your two children. Let's also assume your children intend to sell your home and split the proceeds.
If all of your liquid assets are tied up in your will and those assets can't be released to your heirs until probate is complete, your children might have to foot the bill for your mortgage for months, causing a financial strain. In an extreme case, they could even risk losing the home by falling too far behind on the mortgage.
There's also the matter of wills becoming public record as part of the probate process. This means that anyone who wants the details of your loved ones' inheritance can access that information.
An alternative to a will worth considering
Before you decide that a will is your best option for transferring assets to beneficiaries, you may want to consider a living trust. With a living trust, you maintain control over your assets until you pass. From there, a trustee is appointed to follow the instructions in your trust and distribute your assets accordingly.
The nice thing about living trusts is that they aren't subject to probate. This means your beneficiaries may receive their inheritance more quickly, and their information will remain private.
It's a good idea to consult an estate planning attorney to see whether they recommend a living trust over a will based on your goals and financial circumstances. Living trusts aren't for everyone, but they're a tool worth considering and learning more about.
The reality is that many people default to a will for estate planning because they've never heard of a living trust. But it pays to find out more to see which option is most suitable for you.
