Confused about the differences between a will and a living trust? If so, you are not alone. While it is always wise to contact an estate planning attorney to help you decide which is right for you, it is also important to understand the basics. Here is a quick and simple reference guide:
What a Revocable Living Trust Can Do – That a Will Cannot
- Avoid guardianship. A revocable living trust allows you to name your spouse, partner, child, or other trusted person to manage your money and property, that has been properly transferred to the trust, should you become unable to manage your own affairs. A will only becomes effective when you die, so a will is useless in avoiding guardianship proceedings during your life.
- Bypass probate. Accounts and property in a revocable living trust do not go through probate to be delivered to their intended recipients. Accounts and property that pass using a will guarantees probate. The probate process, designed to wrap up a person’s affairs after satisfying outstanding debts, is public and can be costly and time consuming.
- Maintain privacy after death. A will is a public document; a trust is not. Anyone, including nosey neighbors, predators, and the unscrupulous can discover what you owned and who is receiving the items if you have a will. A trust allows you to maintain your loved ones’ privacy after death.
- Protect you from court challenges. Although court challenges to wills and trusts occur, attacking a trust is generally much harder than attacking a will. If there is a challenge to a will, the probate court will stop all proceedings until the matter is resolved, which can put the will contestant in the very strong position of demanding to be paid to go away. Because there is no probate court involvement is no necessary in the administration of a trust, challenging a trust does not result in everything grinding to a halt. This puts the trust contestant at a disadvantage and removes the leverage the contestant would have had in probate court. For other ways on how to avoid conflict over your estate after you pass away, see https://www.galliganmanning.com/how-to-avoid-family-fighting-in-my-estate/.
What Both a Will & Trust Can Do:
- Allow revisions to your document. Both a will and revocable living trust can be revised whenever your intentions or circumstances change so long as you have the mental ability to understand the changes you are making. (WARNING: There is such as a thing as irrevocable trusts, which cannot be changed without legal action. Irrevocable trusts are different estate planning tools from a revocable trust, which is what we are talking about here.)
- Name beneficiaries. Both a will and trust are vehicles which allow you to name who you want to receive your accounts and property. A will simply describes the accounts and property and states who gets what. Only accounts and property in your individual name will be controlled by a will. If an account or piece of property has a beneficiary, pay-on-death, or transfer-on-death designation, this will trump whatever is listed in your will. While a trust acts similarly, you must go one step further and “transfer” the property into the trust or name the trust as beneficiary of your property and financial accounts – commonly referred to as “funding.” This is accomplished by changing the ownership of your accounts and property from your name individually to the name of the trust or by naming the trust as beneficiary of the property or account. Only accounts and property in the name of your trust or designating your trust as beneficiary will be controlled by the trust’s instructions.
- Provide asset protection. Both a trust and a will may include protective sub-trusts which can allow your beneficiaries to receive some enjoyment and benefit from the accounts and property in the trust but also keep the accounts and property from being seized by your beneficiaries’ creditors such as divorcing spouses, car accident litigants, bankruptcy trustees, and business failures.
While some of the differences between a will and living trust are subtle; others are not. An estate planning attorney can work with you to help you determine which is better for you, a will or a revocable living trust, so that you end up with an estate plan personalized to your needs.