Dena Standley | January 11, 2023
Summary: Living trusts and wills are both estate planning documents that take care of the distribution of someone’s assets, money, and possessions after death. Choosing one over the other also depends on your age, wealth, and the various relationships you have. One of the biggest differences between these documents is that a living trust does not involve the court, while a will undergoes a lengthy, structured court process known as probate. Below is SoloSuit’s guide on the difference between a living trust and a will and which might be better for you.
Choosing between a professional living trust and a will depends on your particular circumstances and the sensitivity of your family situation. For instance, do you want your estate to go through probate, for guardians to be named for your children, require property transfer while still alive, or have witnesses present?
These are some of the concerns you must consider, and afterward, choose the estate plan that addresses your most essential needs. To assist you in making an informed choice, this article will help you understand the difference between a living trust and a will and their unique functions.
A living trust is a legal estate planning document that puts most of someone’s assets in a trust during their lifetime. After their death, a trustee manages the trust and distributes the assets to the beneficiaries per the specifications outlined in the trust.
Living trusts do not go through the court process, allowing your beneficiaries to gain access to your property immediately. This benefit saves your loved one's time and money but comes at a cost for you while you are alive. Other benefits include:
A major drawback of a living trust is that you cannot name a guardian for your children or executor of the estate. A will may be preferred in such circumstances.
A will is a legal estate planning document that details how someone’s assets will be distributed at the time of their demise. The document is revocable and can be amended at any time while they are still alive. One can also use a will to name an executor or guardian for their children, explain how to pay their taxes, and forgive debts. Other benefits of a will are:
After death, the execution of a person’s wishes (in the will) undergoes a highly structured and court-supervised process known as probate. This process may take longer and cost more for their loved ones—compared to a living trust.
As we have seen so far, there are distinct differences between a living trust and a will. The following table gives a comprehensive summary of these differences.
|Does not require witnesses||Must have at least two witnesses|
|Relatively complex to make and maintain||Often made once and only adjusted when there's a chance in property|
|Instruction on payment of debt and taxes is left up to the Trustee||Includes how the executor should pay debt and taxes|
|An executor isn't required or named, but a Trustee is required||An executor must be named for the document to be valid|
|No need to name a property manager or guardian for the children||A property manager or guardian for children is named and enforced by law|
|The document is protected from court challenges||The document can be challenged in court|
|Requires transfer of assets for it to be complete||Does not require the transfer of assets|
|Does not go through probate||Must go through probate|
|Everything is kept private||The document becomes public knowledge|
Now, let's look at an illustration for more clarity.
Example: Jim had always postponed making an estate plan because he feared thinking about the reality of death. On his sixtieth birthday, he knew he couldn't avoid it any further. He called a lawyer his son had recommended and shared his concerns. Jim wanted a document that would avoid the court process. He also wanted to transfer everything to his two sons while he was still alive but still maintain ownership. The lawyer recommended a living trust as it met his requirements. In addition, his children were both responsible adults and had a good relationship with their father, reducing the chances of having a court battle.
Generally, a living trust and a will accomplish the same objective, leaving instructions on how your estate should be distributed. However, a living trust allows you to enjoy other benefits and comes at a higher price, while a will does not. Choosing one over the other also depends on your age, wealth, and the various relationships you have. Hence, you should select an estate plan document that meets your needs and is in the best interest of your loved ones.
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