Planning your estate is essential to safeguard your assets and ensure your properties and belongings are distributed according to your wishes after your death. Two legal documents can help you achieve this goal – a will and a living trust; this blog aims to explain the differences.
|Purpose||A legal document that outlines how a person’s assets and property should be distributed after death. It allows you to specify beneficiaries, guardians for minor children, and an executor to manage the estate.||A legal arrangement allows you to transfer ownership of assets to a trustee for the benefit of specific individuals or entities, known as beneficiaries. Revocable Living Trust: Allows the grantor to make changes during their lifetime. The assets remain part of their estate for tax purposes. Irrevocable Living Trust: Once created, an irrevocable living trust cannot be changed or revoked without a court order or approval of all the trust’s beneficiaries, and a third-party trustee must be appointed. The assets in the trust are no longer part of the grantor’s estate, protecting them from estate tax. However, the level of protection offered by an irrevocable living trust may vary by state.|
|Probate||When a person with a will (a testator) passes away, their will typically goes through the probate process, a court-supervised procedure to validate the will, pay debts, and distribute assets. Probate is a public process and can be time-consuming and costly.||Assets held in a trust generally avoid probate, as they are not part of the deceased person’s estate. This can result in a faster and more private distribution of assets to beneficiaries.|
|Privacy||Wills become public documents and records once they go through probate, making them accessible to anyone.||Trusts offer greater privacy because they do not go through probate. Terms and beneficiaries are typically kept confidential.|
|Asset Management||A will primarily deals with the distribution of assets after death. It does not provide ongoing management or protection of assets.||Trusts can be used for ongoing asset management. The trustee, who may be the grantor or someone else appointed by the grantor, manages and distributes assets according to the terms of the trust. This can be particularly useful for beneficiaries who are minors, incapacitated, or in need of structured long-term financial support.|
|Flexibility||Wills are relatively straightforward and limited in their flexibility. They are typically used for basic estate planning. A will only takes effect after the testator’s death, and it can be changed or revoked during their lifetime as long as they are mentally competent. It provides no control over assets during the testator’s lifetime.||Trusts are highly customizable and can be designed to achieve specific goals, such as providing for a loved one with special needs, avoiding estate taxes, or protecting assets from creditors. A trust can be set up to take effect either during the grantor’s lifetime (living trust) or after their death (testamentary trust). Living trusts offer the grantor more control over their assets during their lifetime, as they can serve as both the grantor and the trustee.|
|Cost||Creating a will is generally less expensive than setting up a trust and can be created without legal assistance. However, there may be costs associated with probate proceedings after the testator’s death.||Establishing a trust can be more expensive upfront due to legal and administrative fees, but it may help save on probate costs and other expenses in the long run.|
|Legal Challenges||Wills are more susceptible to legal challenges, such as claims of undue influence, lack of testamentary capacity, or fraud.||Trusts are often more challenging to contest successfully, as they are typically established with greater formality and scrutiny.|
When considering whether to create a will or a living trust, it is crucial to determine your own needs and priorities and those of your loved ones. Estate planning can be a daunting task, and it is often wise to seek the guidance of an attorney and a financial advisor to help you make the right decision for your specific situation. If you want to schedule a confidential consultation, please contact The Law Offices of Reginald Keith Davis.
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Phone: (913) 299-8789