The establishment of a will or a living trust is an important part of estate planning. Wills and living trusts both allow you to name beneficiaries for your assets. However, they are each useful for different purposes and knowledge about the differences between them is essential in choosing which option is best for your personal situation. Estate planning in general is important in ensuring that your assets will be managed correctly if you are unable to do so yourself either through incapacity or death. Wills and living trusts manage those assets in the event of such situations, but they do so in different ways.
Both wills and living trusts allow you to name beneficiaries for your property. In a will, you simply describe the property and to whom it should be transferred ownership in the event of your passing. In a trust, the property must be transferred to the trust first before the property and beneficiary are described.
When it comes to leaving property to children under 18, some considerations are worth making. First, except for items of little value, children may not legally own property. When property is left to a minor, it must be managed by an adult until the child reaches the age of 18. When handled through a trust, the trustee maintains control of the property for the child until the child reaches an ages determined by you. When done so using a will, an adult will also be named to manage the property for the child unless you choose to establish a testamentary trust or name a custodian under the Uniform Transfer to Minors Act.
Both revocable living trusts and wills allow revision of the documents when circumstances or desires change. However, irrevocable living trusts do not have this benefit. Irrevocable living trusts are typically only used by the wealthy to protect money from taxes and are substantially more complicated.
Probate is a legal process that takes place following the passing of an individual. It includes:
- Legally proving in court that a deceased person’s will is valid
- Identifying and inventorying any and all property
- Having property appraised
- Paying off any taxes or debts
- Distribution of the property in accordance with the will or state guidelines if no will exists
Avoiding probate is a huge advantage living trusts have over wills. Probate involves paperwork and court appearances by attorneys. The attorney and court fees are paid from the estate property before it is distributed to the beneficiaries. This means if you have a will instead of a living trust, your beneficiaries will not receive as much as they would if you had established a living trust instead. It’s important to note that the process does not take place quickly and is usually very expensive.
If you don’t own much property or have several debts, a living trust may not be necessary. Probate is a greater concern for individuals with some degree of wealth. It’s important to consult with an estate planning attorney before making the decision.
Living trusts are also more private than wills. A will becomes public information following your passing. A living trust does not. This is another consideration worth making if you wish to keep your affairs private.
Living trusts require being signed and stamped by a notary public. Wills, however, do not.
Transfer of Property into a Trust
While not necessarily a difficult or complicated process, another step that is necessary with establishing a living trust is transferring the property into the trust. For many items, this is as simple as making a list of the property and attaching it to the trust document. For items with title documentation such as real estate, however, the item must be retitled so that the owner of the property is the trust.
Protection from Court Challenge
Wills and living trusts can both be challenged in court. While this rarely happens, living trusts are more difficult to challenge than wills.
Living trusts offer a better means of incapacity planning than wills do. The reason for this is that in a living trust, you can grant any individual authority to manage your affairs in the event that you become incapacitated and unable to do so yourself. Due to the fact that wills play a part only in the event of your passing, they do not allow you to name someone to handle your affairs in such a situation. However, you do still have the ability of establishing a durable power of attorney
in addition to your will. This would grant such authority to another person if such a situation were to present itself.
In a will, you may name guardians for care of minor children. This cannot be done through a living trust and you would need separate legal documentation of your wishes. In addition to guardianship of children, you can also name property managers for any minor children’s property. This also cannot be done with a living trust.
In a will, you may name an executor who will be in charge of wrapping up your estate following your passing. This individual works with the courts and pays any outstanding debts before distribution of your property following probate. A living trust does not allow you to name an executor, but due to the fact that probate is avoided and instead a trustee is named, an executor is not needed.
In conclusion, living trusts and wills are both an essential part of the estate planning process. You would be empowered to further educate yourself on them and consult with an estate planning attorney to determine which option is right for you.
Dwight Tompkins is an estate planning lawyer with years of experience in establishing living trusts and wills. For questions, or to schedule a consultation, contact the office today at 714 385 0044.
Protect yourself and your beneficiaries. Contact Dwight Tompkins today!