Estate planning has many facets, and it can be challenging to work through all the pieces. Estate planning is one of the most powerful tools available to ensure that your wishes are carried out and that your loved ones will not be burdened with complex and often difficult decisions. By planning ahead now, you can gain the peace of mind of knowing that your end-of-life expenses and assets will be dealt with exactly as you intend. As you work through this process, you may find yourself choosing between a will or a living trust. Understanding the difference between these planning documents can help you move through estate planning more confidently and clearly.
What is a Will?
To put it simply, a will is a document that outlines how your estate should be handled upon your death. There are several factors that determine the legality of a will. First, the person making the will must be of legal age (typically 18) and have adequate mental capacity (usually referred to as being “of sound mind”) when crafting the document. In addition, a will requires two witnesses. The witnesses must be “disinterested parties” — in other words, not beneficiaries named in the will or otherwise interested in your estate plan.
In a will, you can name beneficiaries for your property and assets. These are the people, typically family members or friends (or sometimes charities), that will inherit your possessions once you’re gone. You can also name an executor, which is a person who will serve in a legal capacity to make decisions on your behalf regarding the instructions you laid out in the will. That is, the executor is a person you trust to put the wishes of the will into action.
In addition, wills can serve the purpose of disinheriting individuals who would otherwise in the absence of a will be considered heirs.
What is a Living Trust?
A living trust is another option for estate planning. Like a will, it provides specific instructions for the transfer of property after your death, but the entities have some key differences. A living trust is revocable, which means it can be changed as long as the trustor is alive and of sound mind.
Unlike a will, a trust is handled outside of probate court. There are legal hurdles to clear in order to set a trust up, but there are far fewer to undergo during the execution of the trust. This means that property can be passed to the named beneficiaries immediately upon the trustor’s death.
The trustor maintains ownership of all property in the trust as long as they are alive, and often the trustor also serves as the trustee — the one who manages the trust. It is common practice to appoint a successor trustee. This is an individual who will manage the trust in the event that the trustor becomes incapacitated. Depending on the trustee’s management — and the trustor’s instructions — the contents of the trust could be passed on to beneficiaries immediately upon the trustor’s death or the trust could continue running until certain milestones (such as a beneficiary reaching a minimum age) are met.
Will vs. Living Trust: Which Document Do You Need?
Choosing between a will and a living trust can be a complicated decision that is best determined by your circumstances and goals.
If you have minor children, you will need a will to establish a guardian for them. This is not something that can be accomplished with a living trust.
If you anticipate legal objections and arguments over your wishes, a living trust can be a more secure way to make sure that your goals are met.
Both wills and living trusts provide protection for your property and assets and help ensure that your wishes are met, but there are some notable considerations to make when choosing between them. A will is often easier to set up (though it will require witnesses), but a will also requires probate upon your death, meaning that it can be more complicated and time-consuming for your beneficiaries to receive property. While a living trust eliminates the need for a probate and passes on property to beneficiaries much more quickly, it can be more legally complex and time-consuming to set up in the first place.
Both wills and trusts can be revised, so it is important to get your estate planning documents created as soon as possible with the knowledge that you can make changes over time as your assets, desires, or family situation changes.
The best way to determine which estate planning tools will best meet your individual needs is to consult with an experienced and trustworthy attorney who can advise you of the steps that will best match your unique situation.
Reach out today to schedule a free consultation.