No one wants to think about their death but it is something that no one can escape, however, it is necessary to assure you that your estate and family are safeguarded when you will not be around to secure them. While thinking to do so you can think of creating either a will or a trust. While the former completely emphasizes the dispensation of your belongings after you die, the latter emphasizes the management of the assets before and after your demise. Depending on your estate’s value and your family situation, you can opt for either a will or a trust or both. In order to make you understand them, we have summarized what they are and the factors to be considered while choosing them.
What is Will?
A will is legally written, signed and witnessed document that sets the instructions and desires regarding the dispensation of your property once you pass away. It comes into force once you are deceased after being passed through probate and can be revoked and updated any time while you are alive subject to your mental competency. Apart from dispensing the assets, a will also permit you to appoint an executor to manage the dispensation of your property and a guardian/custodian for your minor/dependent/disabled family member.
A will involves probate proceedings which can be time and money wastage and also creates trouble for the family. It also hinders your privacy as your property will come into the public record.
What is Living Trust?
A living trust is a legal structure that permits a person to put his/her belongings under it with a set of guidelines that determines their management and dispensation while you are alive and after your demise, respectively. The trust is managed by a person called the trustee which can either be the trust owner or a person appointed by the trust owner, who owns the responsibility to secure, handle and dispense the trust maker’s assets according to the set guidelines of the trust. A trust can have single or multiple beneficiaries to whom the assets are dispensed after the owner’s demise.
It is of two types viz. revocable and irrevocable and you can opt for any one of the two. While a revocable living trust permits you to have full control of the trust and can even revoke whenever you want to, on the other hand, an irrevocable living trust doesn’t offer you the control of the trust and restrict you from cancelling it after signing the documents.
Difference between Living Trusts & Will-
While a will need to pass through probate which is time and money wastage process, a living trust avoids probate. Due to probate, your privacy is hindered as a will brings your assets in public record, while a trust secures your privacy by avoiding probate.
A living trust comes into effect as soon as it is signed while a will becomes effective after your demise. Thus, a living trust manages your property while you are alive and dispense it after your demise as per the trust’s guidelines. Contrarily, a will only focus on the dispensation of the property after your demise as per your desire.
While a living trust permits you to get a look at how the trustee is managing your assets while you are alive, a will is executed after your death so you can only get assured by writing clear execution.
A will is more likely to be challenged in the state court as compared to the living trust as the former is public and there are set rules for challenging a will due to a few loopholes. On the other hand, there are a few laws regarding challenges to a trust.
While placing your property such as real estate, vehicles, etc., you need to reissue them in the name of the trust to make it the owner and then only it will be managed by the trust. A will saves this extra step as you are the owner so no reissue is required.
A will is comparatively less expensive to be set up than a trust. Also, the trust needs to be funded throughout your life to avoid the freezing of assets.
A will doesn’t include the provision of incapacity and a power of attorney is additionally required. If you don’t have a POA document, then the court intervenes to determine who will manage your affairs. On the contrary, in case of a trust, the successor trustee will take over the responsibility of the trust avoiding court.
The trust includes federal and estate tax advantages, which the will fails to do. Also, the trust itself takes care of the minors, dependent and special need family member as per the set instruction of the trust by the successor trustee, while a will needs a guardian to be appointed to do so.
A living trust helps your child’s inheritance to be protected from the creditors and bankruptcy, while a will doesn’t have such provision.
In the end, it’s completely your choice to choose either a will or a trust or even you can have a will along with one trust to properly handle your estate. It is advised to discuss with an estate planner to decide which one will be the best for your estate while meeting your goals.