When planning your estate in North Carolina, understanding the differences between trusts and wills can help you decide which option fits your needs. Both tools help pass your assets to the people you care about. But they work in different ways, have different costs, and offer different benefits. This guide will explain what each one does, how they handle property, and what you should think about when choosing.
Major Differences Between Trusts and Wills
A will is a legal document that tells how you want your property divided after you die. It names an executor to handle your estate and usually goes through a court process called probate. Probate confirms the will is valid and oversees the distribution of assets. This process can take time and may involve court fees.
A trust is a legal arrangement where you transfer property to a trustee to manage for your benefit or for others. Trusts can avoid probate because the property is owned by the trust, not you personally. This means the assets can be transferred faster and without public court proceedings. Trusts also keep your estate details private.
What Property Can Be Included?
Wills can cover most types of property, like your home, bank accounts, and personal belongings. However, some assets like life insurance or retirement accounts usually pass outside the will to named beneficiaries.
Trusts can handle a wider range of assets. Besides property and money, they can include business interests, digital assets, and life insurance policies. Placing these in a trust can make managing and distributing them smoother.
How Probate Works
Probate is a court-supervised process needed to settle a will. It confirms your wishes, pays debts, and distributes your property. The probate process can take months, sometimes longer if the estate is complex or there are disputes. It also makes your estate records public, which some people want to avoid.
Trusts avoid probate. Since the trust owns the property, the trustee can transfer assets directly to beneficiaries without court involvement. This helps speed up the process and keeps your estate details private.
Privacy Matters
Wills become public once they go through probate. This means anyone can see the details of your estate, who inherits what, and even the value of your assets.
Trusts stay private because they do not go through probate. The information about your assets and beneficiaries is not made public. This can protect your family’s privacy and reduce the chance of outside interference.
What Makes a Will or Trust Valid?
For a will to be valid in North Carolina, it must be signed by the person making it and witnessed by at least two people who are not beneficiaries. The will can be changed or revoked anytime before death.
Trusts require you to transfer ownership of assets into the trust. Without this transfer, the trust won’t control those assets. Trusts can be revocable, meaning you can change or end them while you’re alive, or irrevocable, which generally can’t be changed.
Saving Time and Money with a Trust
One big reason people choose trusts is to avoid the cost and delay of probate. Legal fees for probate can be around 4% or more of the estate’s value. In North Carolina, these costs often run higher than the national average. Probate can also take months to finish.
Using a trust lets your family avoid these fees and delays. Since trusts avoid probate, your heirs can get access to assets faster and with less hassle.
Planning for the Unexpected
Trusts also help plan for times when you might be unable to manage your own affairs. If you become incapacitated, a trustee can step in to handle your finances and property. This avoids court battles or the need for a guardian to be appointed.
Managing Assets Efficiently
Trusts allow for clear management of your estate. This is helpful if you own property in different states or have complicated financial holdings. The trustee can manage all these assets in one place without waiting for probate in multiple states.
Protecting Inheritances
Trusts can protect the money or property you leave behind. You can set rules about when and how your beneficiaries receive their inheritance. This can protect them from creditors or help if they might not manage money well on their own.
Tax Benefits
Some trusts, like irrevocable trusts, can help lower estate taxes by removing assets from your taxable estate. The federal estate tax exemption is over $12 million per person in 2023, but trusts can still be useful for reducing taxes in large estates.
Which One is Right for You?
Wills are simple and less expensive to create, but they come with probate and less privacy. Trusts take more work and cost more upfront, but offer faster asset transfer, privacy, and control. Many people use both—a trust for key assets and a will to handle anything left out.
If you want to avoid probate, keep your affairs private, and have more control over your estate after death or in case of incapacity, a trust may be a better choice.
Get Legal Help Today
If you’re thinking about estate planning and want to understand how trusts or wills fit your needs, talking with an estate planning attorney in Wilmington can help. We can explain the best option for your situation and guide you through the legal steps. Protect your family’s future and make sure your wishes are clear by planning ahead.