Estate planning is about protecting your loved ones and executing your wishes after you die. Many people assume the best way to do this is through a will. However, a living trust achieves many of the same purposes with some unique advantages.
What is the Difference Between and Will and a Living Trust?
Your last will and testament outline how you want to divide your assets after your death. If you die without a will, the court will take over and divide your assets according to the law, which may be different from what you had planned for your beneficiaries.
One disadvantage of having a will is that it must go through the probate court process before your beneficiaries receive their assets. The estate has to pay all of the court costs, filing fees, and legal fees, which can take up to a year to complete.
An alternative to a will is a living trust, also known as a revocable trust. By setting up a living trust, you create a legal entity that is distinct from you and your estate. If you act as the trustee of the trust, you won’t notice any functional difference in how you deal with your assets. Once you pass away, the new trustee can distribute your assets to your beneficiaries without the need for the probate process.
What Are the Benefits of a Living Trust?
The main benefit of a living trust is that there is no court intervention after your death. Instead of waiting a year and dealing with legal and administrative costs, your beneficiaries will receive their allocated assets almost immediately.
Living trusts also have additional advantages over wills. Unlike a will, which some family members may contest, you have total and complete control over your trust. You can change the conditions of disbursement, add assets, remove assets, and even discontinue the trust at any time.
Another advantage of a trust is that you can also control how your beneficiaries use their allocated assets. Some beneficiaries may be too young or irresponsible to handle large amounts of money. By setting out clear terms and adding “spendthrift” clauses, you can protect your loved ones while ensuring their comfort and care.
Having a living trust also protects you in the event of incapacity. You can nominate an individual to act as a trustee who will manage your affairs and assets. If you only have a will, the court will appoint a conservator who may not act in your best interests.
Should I Choose Both?
Choosing a will or a trust doesn’t exclude the other from your estate planning. You can combine the two, which can be especially useful if you want to keep some assets in your name. A pour-over will transfers those assets into the trust in the event of your death.
Estate planning needs are unique to each individual, and a customized plan should consider your circumstances to find the ideal solution. An estate planning attorney can assist with finding the right estate plan for you and your loved ones.