Living Trusts and wills can be essential documents in your estate plan as you move to protect your loved ones and assets. While they can offer overlapping protections and guidance, a living trust and a will have some key differences that can significantly impact your family and other inheritors. Read on as Titan reviews the differences between a living trust vs a will, as well as some variations you may want to consider as you begin to draft these critical end-of-life documents.
Table of Contents
- What Is A Will?
- What Is A Revocable Living Trust?
- What Is An Irrevocable Trust?
- What Are The Differences Between A Living Trust Vs A Will?
- Can I Have A Living Trust And A Will?
What is a Will?
The Last Will and Testament is a legal document that details a person’s wishes regarding the guardianship of minor children, the distribution of their assets after their death, and who the estate executor should be. While it might feel overwhelming to contemplate now, naming a guardian or guardians for your young children in a will is critical in easing the transition of care at what will be a difficult time. A will also allows you to name property managers for any property (homes, cars, or anything of significant value) being left to minor children who cannot legally own them until after they turn 18. Without a will, the court will make all guardianship decisions.
Assets can be bequeathed to relatives, friends, educational institutions, or charities. While you may choose to handle the distribution of larger assets (like a home) in other ways, a will is a useful instrument for expressly bequeathing items to specific people, so there is no mistaking your wishes once you are gone.
Even if you have provided explicit detail about the distribution of all of your assets following your death, your will must go through probate. This can be a lengthy process, even if nobody contests it, and the details of your Last Will (and the probate court records) are public. Probate lawyers can be pricey, and only a handful of states allow you to avoid using them. However, financial assets such as life insurance, IRAs and other retirement accounts, and mutual funds will go directly to whoever has been named a beneficiary. Those assets are not required to go through probate court.
A Last Will is also an excellent way to express your funeral wishes. By offering instructions about your vision for your end-of-life celebrations, your family can be sure that they are genuinely honoring you and your life. It can also ease the decision-making process for them at an intensely emotional time. To learn more about advanced funeral planning, click here and here.
What is a Revocable Living Trust?
A Living Trust creates a fiduciary relationship with a trustee who is given the legal authority to handle your assets for your beneficiaries. Unlike a Last Will, which is only activated upon death, a revocable living trust takes effect as soon as the trust is established and the assets are moved into place. You also can use a trust to manage the distribution of property for you and your family during life. It is referred to as being “revocable” because it can be amended at any time to reflect a change in assets or beneficiaries.
Designing a Living Trust is a more complicated process than drafting a will, but it may offer you greater say over how your assets are distributed. Typically, having a trust will keep your assets from going through the sometimes costly probate process, and the details of the trust are kept private.
What is an Irrevocable Trust?
In an irrevocable living trust, you would lose the ability, in most cases, to change the beneficiaries named in the trust. Technically, the trustee would become the owner of the assets that have flowed into the trust. This approach might be a favorable one for those hoping to reduce their estate taxes significantly.
What are the Differences Between a Living Trust vs a Will?
When considering designing a living trust vs a will, there are various advantages and disadvantages to keep in mind. Among them:
- Only a will can name the legal guardians for your minor children.
- A will allows you to detail your wishes for your funeral or any other end-of-life celebrations, while a Living Trust does not.
- A will covers the distribution of all of the assets that are in your name after you die, but a Living Trust only pertains to property that has been transferred and held in the name of the trust.
- A Living Trust can effectively distribute and manage your assets during life, while the terms of a Last Will can only go into effect upon your death.
- A will passes through probate court and is a public document. A Living Trust is private, and the terms are enacted outside of the probate court.
- A will can be easier to establish and less expensive to draft than a Living Trust.
- A Living Trust can help you plan for incapacitation or disability.
- A Living Trust, in some cases, can reduce your estate’s tax burden.
Can I Have a Living Trust and a Will?
Yes. Some experts recommend having both a Living Trust and a Last Will, particularly if you have minor children. The Last Will names guardians for your children, details your wishes regarding your funeral, and appoints an executor to oversee your assets’ distribution after death. If you have a Living Trust, you have more control over your assets’ distribution while you are still alive. When designed properly, these two legal documents can work in concert to provide you with a secure estate plan.
Good advice is well summed up in this quote from Cody Barbo, CEO and Co-Founder of Trust & Will:
“There are a lot of things to think about when it comes time to decide between a trust and a will. Yes, you can have both, but it truly depends on what you are looking for to determine which option is best for you. For a brief overview, trusts provide for the management and distribution of your assets during your lifetime and after death. A trust goes into effect the moment it is signed and funded. On the other hand, a will, allows you to do things like name guardians for your children, appoint an executor for your estate, and declare your final wishes, and will do not go into effect until the moment you pass away. Furthermore, Trust & Will can help you better understand the type of Will or Trust you need so that you can have the best comprehensive Estate Plan."
The information provided above is not meant to replace expert estate planning, tax, or financial advice. As you design your estate plan, please reach out to a qualified professional.
Do you have questions about creating an end-of-life checklist or any other issues relating to end-of-life celebrations? Titan Casket is here to help you get the funeral you want at a fair price. Contact us in the chat window or here to get started.