Living Trust VS Will—Which is Best?
There are many things you could leave behind for your family that would qualify as a great legacy. But many would argue that the greatest legacy is a solid estate plan. And, as a part of estate planning, allocating your assets in a living trust or a will or a trust could be the final gift that is truly appreciated by your surviving loved ones.
If something happens to you with no living trust or will in place, your assets are divided up according to state law in probate court. Probate Court is usually very tedious and stressful. And it takes a long time to settle an estate that way. This is partly because of the complicated rules involved in the procedure, and also due to the constant supervision of the court.
Instead, having a trust of will set up in your lifetime allows you to control how your assets are divided. A trust is a better option because it nearly immediately transfers all your assets directly to your heirs.
Asking which of these tools is better is a very common question. And while there is no universally applicable answer, you can figure out which would be effective in your unique situation.
What is a Will?
A will is a legal document that contains instructions on how you want your assets to be distributed after your death. In a will, you can appoint your estate executor or representative. You can also name your beneficiaries, choose guardians for your children, and leave specific instructions on how and when your survivors can receive their inheritance.
Wills are submitted to the probate court in the state the deceased last lived. The idea of probate courts might seem daunting, as has been inferred above. But in this case, all the probate court judge does is ensure that the will is legal and valid. Once the judge established this, your designated executor has the legal right to administer your estate as you instructed. The one drawback is how long it can take. Most times, it takes a year or more for a will to be validated, sometimes longer, depending on where you reside. Some probate courts are busier than others.
Probate court is tedious, stressful, and dicey when you do not have a will. This is because it takes much longer for your estate to be settled, it also costs more money, especially where litigation becomes necessary. This can create strife and tension among your surviving family members, as they may each have their own ideas about what you wanted. Having to deal with this and the crushing grief of losing you can estrange your surviving family.
Dying without a will is called dying intestate. When a person dies intestate, their state laws will determine who inherits their assets. If you do not create a will, your state might pass on your estate to people who haven’t been a part of your life for many years. For example, if you are unmarried and childless but you live with your long-time partner, your state’s intestacy laws might pass your assets to your estranged parents or siblings. While your partner gets nothing.
Don’t think there’s nothing for you to put in a will. Even if you don’t own many assets, what about last wishes you’d like to document? It could even just be how you want the funeral to go. If you don’t have a will or a trust yet, you should at a minimum create a last will and testament. Estate attorneys specialize in drafting wills and other estate documents. An attorney can help you with any confusing details, and often for less money than you think.
What is a Trust?
A trust is an estate planning tool that exists solely for the purpose of protecting your assets from probate. The most often-created trust is a revocable living trust, so this is what we’ll be discussing here, whether we refer to it as a trust, a living trust, or revocable living trust. In the battle of living trust vs a will, you choose decide on the basis of the following criteria:
- You own a home and want to keep it from probate, no matter the size of your other assets.
- You have assets in excess of $20,000, whether or not you own a home.
A good living trust includes a pour-over will, so the battle of living trust vs will really doesn’t exist: you need both. This type of will essentially gives anything you own—not yet transferred into the trust at the time of your demise—to the trust. The pour over will goes through probate court, but in this case it’s quick. The probate judge just verifies that a living trust exists, and that it’s been properly executed.
And though this will does become public record at this point, it only says that the assets within it are being given to the trust. It names none of your beneficiaries, and names none of the other property already in the living trust. It’s always best to update a living trust yearly, or at least as often as you buy, sell, or change your mind about your beneficiaries, so that the most possible is kept out of the pour-over will.
A pour-over will is necessary, even if all your assets are already in your trust, because it also handles matters like appointing a guardian for your children, which isn’t done in a revocable living trust. This shows there should be no debate about living trust vs will.
A big benefit of having a living trust is that it can be kept private. Though a living trust can be recorded with the county recorder, a big reason people opt for a trust over a will is that recording it is not mandatory. Not making it public record by recording it keeps your estate finances and details about your beneficiaries private.
A last will and testament determines how your assets will be shared when you die. A trust becomes the legal owner of your assets the moment you transfer them to the trust, yet you retain control all of the assets within it during your lifetime.
Revocable living trusts are much more common. In these trusts, the initial trustee (in some states known as grantee) is the person who initially creates the trust and moves assets into it. This individual is the initial trustee for the duration of his or her lifetime, or unless he or she becomes mentally incapacitated, in which case the successor trustee takes over. Once the successor trustee takes over, he or she essentially takes over all duties the initial trustee carried.
The initial trustee can change the terms of the trust, undo them completely, or move property in and out of the trust at will. After the successor trustee takes over, he or she does the same.
Though we refer to revocable trusts in this article, you should understand what an irrevocable living trust is in case it happens to fit your situation better.
Irrevocable living trusts are different. They last forever, and as the name implies, are irrevocable. In these trusts, the grantor cannot be the trustee, a trustee is named. Once you fund an irrevocable living trust by transferring your property into it, that property is placed in the care and control of the trustee. You can’t take it back or undo the trust without a court order.
In most cases, people choose irrevocable living trusts because of the unique tax implications beneficial to high-net-worth individuals. And in some cases, creating this trust helps to reduce the amount of assets you control, and is a decision some people make for personal reasons.
Last Word on the Living Trust VS Will Debate
There are many positive reasons to either have a will or a trust. A will is fairly simple, straightforward and cheap compared to a trust. But a trust has far more protection and privacy than a will.
A will or testament only goes into effect after the testator is dead. While a living trust goes into effect as soon as assets are transferred into it. You can change your will or your revocable living trust as many times as you want until your demise, as long as you remain mentally competent.
A trust will streamline and simplify the transfer of your assets after you die. It also avoids a lengthy and likely costly period of probate. But if you have minor children, creating a will to appoint guardians is very important in order to protect the minors and any inheritance—and as already stated, this can be done in the pour-over will usually included with a good living trust package.
Deciding between a will or a trust is a personal choice. Almost everyone should have a will to at least avoid family fights, but not everyone needs a trust. However, if you have property and assets to put in a trust, as well as minor children, then a revocable living trust with a pour-over will is a very good option.
Contact a living trust attorney for help
If you find that a living trust would be beneficial to you, or if you’d like a consultation on which estate planning tool would be best for you, reach out to a living trust attorney as soon as possible. A living trust is an important, but not urgent, task that is too-often left until too late. If you think it’s time you took care of this, check out this complete living trust package by the attorney who creates trusts for high-end financial f