When something grave happens to you – an incapacitating illness or injury, perhaps even death – you’ll want your estate managed adequately so you don’t leave your family and relatives financially in the dark. A trust may be able to ensure your loved ones benefit from your estate, but you could also leave your affairs to a conservatorship.
Which of the two is the better option?
Conservatorships and their advantages
A conservatorship gives someone legal responsibilities to manage your personal and financial affairs. It’s usually done once you lose the physical or mental capacity to make critical decisions. To initiate conservatorship, a prospective conservator files a petition in court to request conservatorship over you. Potential conservators include your spouse, relative, friend or professional fiduciary.
The advantages of conservatorship include:
- Single designated point person for estate management: Having a single conservator look after your estate instead of multiple co-executors ensures that any decision will be settled immediately. This can prevent conflict among relatives and loved ones.
- Legal oversight: A court will monitor your conservator and ensure their decisions will always benefit you.
- Conservatorship of the person: If a conservator has responsibility over your personal and medical affairs, the conservator can make medical decisions in your stead.
Note that a conservatorship is an extreme measure that should only be considered if you are incapacitated and lack an estate plan.
Trusts and their advantages
Trusts, specifically living trusts, will serve as a directive for your estate in the event of your incapacitation or death. Having a trust eliminates the need for a conservatorship, but you must name a successor trustee who will similarly manage your assets. Upon your death, your trustee will distribute the assets to your beneficiaries according to your instructions.
The advantages of a trust include:
- Avoids costly probate processes: Your appointed successor trustee will distribute assets and pay debts directly through your estate. Without a trust, your estate will go to probate court and your relatives may have to pay fees to claim the assets.
- Protection from creditors: Once you place an asset into a trust, creditors can’t come after it – but only if you have an irrevocable trust where you give up ownership of the assets in the trust.
- Some tax protection: If you have a revocable living trust, you may still be paying taxes related to your assets, but the tax rate won’t increase.
Conservatorships and trusts work very differently and serve two different purposes. If you need help understanding which of the two you need, you might want to consult an attorney with estate planning experience who can lay out your options.