Living Trust vs. Will

How do you decide whether a revocable living trust or a will is the best for your estate plan? Deciding between a living trust and a will depends on your estate planning goals. Read on to find out how living trusts and wills differ.

What Are Living Trusts and Wills?

Both wills and living trusts are important estate planning documents.

What Is a Will?

A will is a legal document that describes your estate and a person or an entity that will receive your property. Making a will to make your final wishes known is a common estate planning practice for the distribution of assets. Depending on your wishes, you can also include:

• Special instructions about caring for your minor children and other dependents
• Gifts to family members
• Forming a special needs trust
• Gifts to charity
• Formation of testamentary trusts

A simple will is a primary estate planning tool.

What Is a Living Trust?

A living trust is also called an inter vivos trust. It is another estate planning tool. A grantor creates the trust. It is managed by a trustee to benefit beneficiaries. A trustee can be an individual, a law firm, or a professional trust company. When a grantor creates a trust, the grantor can create a successor trustee who becomes the trustee if the trustee can no longer serve as the trustee.

There are different types of trusts. Living trusts can be either a revocable trust or an irrevocable trust. A grantor can change or revoke the terms of a revocable living trust during the grantor's life. However, upon the grantor's death, the trust becomes irrevocable.

A grantor permanently relinquishes the right to change an irrevocable living trust. An owner gives up control of the trust property in an irrevocable trust.

Do You Need a Trust If You Have a Will?

It all depends. Your estate planning goals dictate whether you need to have a trust in addition to your last will and testament. Wills and trusts are tools. They accomplish many of the same things, but each offers advantages that the other does not. An estate planning attorney can help you identify your goals for your estate plan. Your attorney can help you choose the best tools to achieve those goals.

Differences Between Living Trusts and Wills

Before creating, you should weigh the pros and cons of both a living trust and a will. There are several distinct factors and requirements for wills vs. trusts.

Becoming Effective During Your Lifetime

The main difference between wills and a living trust is that the directives of a will only come into play after the testator dies. You can change a living trust during your lifetime. After creating a living trust, you can transfer or omit certain trust assets as you wish.

You can also use a pour-over will when establishing your trust to have any assets transferred into the trust upon your death. Assets transferred into the trust upon your death do not avoid the probate process.

Subject to Probate Proceedings

Probate is a court-supervised process that deals with your assets and debts at the time of your death. Any assets passing through the will require probate. The parties will have to go to the probate court for any matters regarding estate administration.

Estate administration involves issues such as:

• Proof of the will's validity
• Beneficiaries' challenges
• Creditor disputes

On the other hand, a living trust is not subject to probate proceedings. Upon the grantor's death, a trustee can immediately manage the assets or funds involved in the trust and distribute them to the beneficiaries. However, probate may be necessary to limit creditors' claims.

Private Information vs. Public Record

The information in a will becomes public once a will is submitted to the probate court. People can go to court and look up assets owned by a specific testator. Unlike wills, information about living trusts is not part of the public record. Only the beneficiaries can access the trust documents, and the information remains private. Trust records will go public only if the testator's heirs or parties file a lawsuit to challenge the trust.

Notarized vs. Witnessed

Unlike wills, living trusts must be signed and notarized. However, on the other hand, a will needs to be witnessed by two people. The witnesses must not be individuals who will benefit from the will.

Required Costs and Fees

A will involves costs and fees associated with the probate proceedings that can get expensive. On the other hand, a living trust can avoid those probate costs.

Other Estate Planning Tools

In addition to wills and living trusts, other legal documents and strategies form the basis of a comprehensive estate plan. These include the following:

Beneficiary Designations

One efficient way to strengthen your estate plan is to ensure you have up-to-date beneficiary designations for all assets that can be transferred by a beneficiary designation. Typical assets that can transfer by a beneficiary designation include:

• Life insurance policies
• Retirement accounts
• Securities in brokerage accounts
• Bank accounts that transfer by a payable on death (POD) designation

Beneficiary designations allow you to choose beneficiaries that get paid directly and avoid the time and expense of the probate process. You can put various conditions on the payments of funds, such as a minimum age requirement. Beneficiaries don't even have to be natural persons. They can be entities like charities, revocable or irrevocable trusts, or nonprofit organizations.

Power of Attorney

If illness or incapacity prevents you from handling your financial affairs, a power of attorney document can help. A power of attorney, also referred to as a POA, is a legal document that gives someone authority to act or make decisions on your behalf.

There are different types of POAs based on your needs. For example, you can have a financial power of attorney to help with your financial affairs. Or, you may need a power of attorney for a particular transaction, such as the sale of a business.

Living Wills and Healthcare Directives

A living will is a legal document allowing a person to explain their medical treatment and end-of-life care decisions. For example, one state might use the term “living will," while another state uses the term “advance healthcare directive."

Joint Ownership of Real Estate

Joint tenancy is a form of ownership for real property that allows the title to pass by operation of law. This form of ownership allows you to transfer property after death without going through probate. For example, with a joint tenancy with rights of survivorship (JTWROS), all the owners have a legal right of survivorship. Right of survivorship means if one joint owner dies, the title passes by operation of law to the surviving owners.

Get a Free Initial Legal Review

Both living trusts and wills allow you to determine how to distribute your assets after death. Understanding the differences between living trusts and wills can be quite difficult. Because they have different legal effects, choosing your estate planning wisely is critical.

A local estate planning attorney can provide the legal advice you need to make the best decisions regarding planning your estate. This can bring peace of mind to you and your loved ones. Get a free initial case review by an experienced attorney in your area to choose the best option for your estate planning. You can also use our state-specific forms to get started on your living trust or will.

Differences Between Living Trusts and Wills

You should weigh the pros and cons of a living trust and a will before creating them. There are several distinct factors and requirements for living trusts and wills.

Becoming Effective During Your Lifetime

Unlike a will, which comes into play only after you die, a living trust can be changed during your lifetime. After creating a living trust, you can transfer or omit certain assets as you wish. You can also use a pour-over will at the time you establish your trust to have any assets transfer into the trust upon your death.

Subject to Probate Proceedings

Probate is a court-supervised process that deals with your assets and debts left behind after you die. Any assets passing through the will require probate. The parties will have to go to the probate court for any matters regarding estate administration, such as proof of the will's validity, beneficiaries' challenges, and creditor disputes.

On the other hand, a living trust is not subject to probate proceedings. Upon the grantor's death, a trustee can immediately manage the assets or funds involved in the trust and distribute them to the beneficiaries. However, probate may be necessary to limit creditors' claims.

Private Information vs. Public Record

Once a will is submitted to the probate court, the information goes public. People can go to court and look up assets owned by a specific testator. As opposed to wills, information about living trusts do not go public. Only the beneficiaries have access to the trust documents and the information remains private. Trust records will go public only if the testator's heirs or any parties file a lawsuit to challenge the trust.

Notarized vs. Witnessed

Unlike wills, living trusts must be signed and notarized. However, on the other hand, a will needs to be witnessed by two people, who are not benefitting from the will

Required Costs and Fees

A will involves costs and fees associated with the probate proceedings that can get expensive. On the other hand, a living trust can avoid those probate costs.

Get a Free Initial Legal Review

Both living trusts and wills allow you to determine how to distribute your assets after your death. But understanding the differences between living trusts and wills can be quite difficult. Because they have different legal effects, it's critical to choose your estate planning wisely. Get a free initial case review by an experienced attorney in your area to choose the best option for your estate planning. You can also use our state-specific forms to get started on your living trust or will.