13th Jun 2017
When it comes time to plan for your future, you need to decide if you and your loved ones would benefit more from a living trust or a will. A lot of people opt for both, as they both have their advantages. However, they each have a few disadvantages as well. In this article I will explain what is covered in each and which one might be the better choice depending on your situation.
What is a Living Trust?
A living trust is a legal document that forms a contract in which the grantor (you) sets up a trust of your assets to be managed by an appointed trustee (beneficiary). However, the trustee does not have control of the assets until your death, or at a time which you are no longer able to make decisions. The living trust is not valid until you transfer your property. Most living trusts are “revocable” which means that you can make changes at any time.
With a living trust, you control what happens to your assets and property after your demise, and plan for what should happen if you become incapacitated. It also prevents your financial records from being made public and helps you avoid the probate process.
However, there are a few drawbacks with a living trust. First of all, it is costlier than a will as it must remain active and also is not considered active until it is funded. Also, you cannot appoint a guardian for your minor aged children with a living trust. However, you can designate someone to manage their assets until they reach the legal age.
What is a Will?
A will is a legal and binding document in which you determine how your property and assets will be distributed after your death. Unlike a living trust, a will is only active after your death. You can appoint a legal guardian for your minor children. If you do not have a will in place at the time of your death, your assets and property will be disbursed according to the laws of the state in which you live, which is typically a lengthy and expensive process.
Comparison Between a Will and Living Trust
● A will requires a probate period while a trust does not. A probate can be costly and timely.
● You have the ability to manage your affairs with a living trust. You do not have this option with a will.
● A trust gives you the ability to put a plan into effect to manage your affairs should you become incapacitated.
● You can name a guardian for your minor children with a will, but not with a living trust.
● A will does not go into effect until the time of your death. A living trust is active as soon as you fund it and you can make changes or revoke it at any time (provided you have opted for a revocable living trust as compared to an irrevocable living trust)
Which Is A Better Fit For You?
Whether you should choose to have a living trust or a will and testament is complete at your discretion. A lot of people who have a living trust, also have a will in which they name guardian for their minor offspring, declare an executor of their estate and provide for the distribution of their assets and property. Keep in mind that both of these options come with certain expenses. With a living trust, the expenses can be quite costly as they are ongoing.
If you decide to incorporate a living trust in your estate plan you should ask yourself the following questions:
1. Are you able to actively manage your living trust?
If you are not in the position to actively manage, or fund a living trust, then you should opt for a will instead.
2. Do you have minor children?
While you cannot appoint a legal guardian for your minor children with a living trust, you are able to make provisions for when your child will be entitled to receive their property and assets that are on hold in the living trust.
3. Do you have dependents with special needs that need special provision after your death (or should you become incapacitated)?
A will does not allow you to make provisions for those with special needs while a living trust allows you to have the ability to make such provision as to when you dependents are able to have access to their assets. This includes your spouse, children, grandchildren or any dependents with special needs.
If you have any questions regarding where you should set up a living trust versus a will, feel free to contact Tompkins Law at 1-714-385-0044. . Our expert legal team will gladly give you advice as to what measures you should take when it comes to planning for your future. We have years of experience in estate planning. We know that this process can be quite overwhelming, and will gladly give you a free consultation.