If you’re thinking about your estate plan, you’re definitely considering how you want to protect your assets so that they can be passed on to your loved ones. There are several ways to do this, but people commonly establish wills and living trusts to transfer their wealth to the next generation.
There are some considerable benefits that wills and living trusts each have that we’ll examine in greater detail below.
The Benefits of a Will
A will is the most common estate planning document in use. Its primary function is to distribute one’s entire estate among one’s heirs after death, but it can do a number of other important things as well.
Advantages of a Will
Some advantages of a will include the following:
- Usually very affordable and easy to create
- Ensures assets and property are distributed according to one’s wishes
- Appoints an executor to conduct the estate’s administration
- Automatically accounts for one’s entire estate
- Can name a legal guardian for minor children
- Can specify funeral and burial preferences
Disadvantages of a Will
Considerable disadvantages of a will include the following:
- Must be “proven” in probate court
- No privacy – probate records are public records
- Only becomes relevant after death
- Estate is exposed to federal and state taxation
The Benefits of a Living Trust
A living trust is essentially a legal entity that can hold your assets and property under the management of a trustee. By removing property from your personal estate, there is nothing left to probate when you pass away. Those who create (revocable) living trusts often benefit from the use of their property held by the trust, the remainder of which gets passed down to subsequent beneficiaries when the settlor (trust maker) passes away.
Advantages of a Living Trust
A few advantages of a living trust include the following:
- Avoids probate court if funded during your lifetime (saving time and money)
- Generally more private (as long as the probate court isn’t involved)
- Settlor can leave property to any named beneficiaries
- Can reduce exposure to estate taxation
- Becomes valid as soon as it is created and funded
Disadvantages of a Living Trust
Some disadvantages of a living trust include the following:
- Can be costly to create
- Doesn’t allow for guardianship determinations
- Probate can still be necessary for any property not funded into the trust
Which Is Better?
Unfortunately, there’s no objective answer to this question. It all comes down to what an individual’s needs and preferences are, and what the extent and condition of their estate are like.
In fact, these two estate planning documents can work together. A living trust is only effective if all of a person’s estate is funded into it. If that person dies without a will, then any property not funded into their trust – either mistakenly or because it was forgotten – will have to go through probate anyway.
The difference is that whereas a will can plan for what happens to this property, the state’s intestacy laws for inheritance do so without one.
Conclusion
There are some very significant advantages that a living trust provides that a will simply doesn’t, and vice versa. Ultimately, people are generally “safer” dying with a will than nothing at all, but those who choose to establish living trusts shouldn’t let their wills languish.
If you are trying to make an estate plan that makes sense for you, your estate, and your family, our attorney at the Law Office of Steven J. Hart can offer the legal guidance you need.
For more information and to schedule a consultation, please connect with us online today!