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While both act to allocate assets, there are differences between a will and a living trust.
In this post, our experienced attorney details each so you can better decide what you need in your estate plan.
What Is a Will?
A will is probably one of the most recognizable components of an estate plan. In most cases, they allow for the distribution of assets after you die based on your final wishes.
A will consists of three parties:
A grantor (the person who creates the will)
An executor (the person that carries out the wishes of the will)
A beneficiary (someone who receives property from the will)
What Is a Living Trust?
A living trust is an estate planning tool used to appoint someone to manage the assets put into it. This person will be responsible for distributing your assets according to your wishes during your life and after your death.
You can set up a revocable or irrevocable living trust, depending on your specific wants and needs.
What Are the Differences Between a Will and a Living Trust?
Trusts are valid during your life - One of the main differences between a will and a living trust is that other than a living will, a will does not go into effect until you die, while trusts may pay out while you’re still living.
Trusts avoid probate - Another notable difference between a will and a living trust is that trusts don’t have to pass through a probate court. This means your beneficiaries get the assets from a trust quicker than a will and the specifics of the trust are kept out of the public eye.
A will can designate guardianship for your children - A trust cannot designate who will take over as your children's guardian should something happen to you before they reach the age of 18.
A will is easier to create and maintain - Trusts can sometimes be more expensive and complicated to maintain compared to a will. While both are important to have, a will is usually easier to set up and change throughout your lifetime.
A trust keeps your assets private - A will becomes public record after you pass away. However, assets within a trust are kept private, which can be a huge benefit for many people who want to keep everything out of the public eye.
Pros of a Will
Typically costs less than setting up a trust
Easier to establish and maintain compared to a trust
Can be changed as long as you are competent and of sound mind
Cons of a Will
Wills must endure the lengthy probate process
All fillings become public record
Assets can take over a year to be allocated to beneficiaries
No tax benefits
Pros of a Living Trust
Beneficiaries maintain privacy
Assets are immediately transferred
Can be changed as long as you are competent and of sound mind
Carries some tax benefits
Cons of a Living Trust
Requires meticulous maintenance
Can be costly to maintain
Requires a lot of paperwork
Can You Have a Will and a Living Trust?
Yes — you can have both a will and a living trust. Everyone can benefit from a will, but not everyone needs to set up a trust. It all depends on your financial situation and goals.
Since wills and trusts have their own advantages and pitfalls, you can use each one to fill the gaps where the other is lacking.
For example, if you have young children (under 18), you should use your will to designate a guardian for them should you die before they reach legal age, which can't be done with a trust. On the other hand, you may want to set up a trust if you have a business. Since trusts avoid probate, your business will immediately transfer ownership to the beneficiary of your choice.
Do You Need Help With a Will or Living Trust?
To know what's best to include in your estate plan, get in touch with our team of experienced estate planning attorneys today! Start planning for the future by contacting us online or calling our office.