July 8, 2013 at 4:38pm
First, as a primer for living trusts vs. wills, check out the table below. Then, for more details on each segment, plus a little extra, read on.
While this should give you a pretty good idea of what each document does, and the strengths and weaknesses of each, there are also personal questions you should take into account before deciding which one is the best for you.
Naming beneficiaries - that's basically the point of each of these documents, to name who will get your property after your death.
Leave property to young children - you can leave property to children younger than 18 - so long as it is of small value. In both cases, you would need to appoint a guardian to take care of the property you leave your children, a trust simply facilitates this process because you've already chosen a trustee, who will manage the property until the child reaches legal age.
Revise your document - while a will can be changed and altered up to the moment of your death or incapacitation, the revisability of your trust depends on the kind of trust you create. A revocable trust is one that can be altered similarly to a will. An irrevocable trust is one that, once written and signed is permanently binding.
Avoid probate - property left through a living trust does not go through probate, a lengthy and occasionally complex legal undertaking in which the validity of a will is assessed and property is distributed. Property left through a will does. However, before deciding to set up a trust, you should look at your state's probate guidelines: many states have a "simplified probate" process, in which estates below a certain dollar amount go through a relatively quick and painless probate process. Since living trusts are more expensive to maintain than wills, given that they require ongoing management, if you fall under that dollar amount, you are vigilant about updating your will, or you have large amounts of debt, a trust may not be the right choice for you.
Keep privacy after death - after your death, a will becomes a public document. A living trust does not.
Notary Public/Witnesses - where a will only needs witnesses in order to make it official (you do notneed a lawyer to create an official will, although one is recommended). In order to make a living trust official, you need a notary public to sign and stamp it.
Transfer of Property - a trust can only manage the funds within it. As such, you need to transfer all of your assets into your trust prior to your death in order for it to be an active trust. This not only applies to purely financial assets, but also to property owned under your name - real estate, for example, should be in the trust's name, not your own, in order to successfully pass from person to person.
Protection from Court Challenges - although challenges to either trusts or wills is fairly rare, a trust is generally seen as more valid and easier to defend in court.
Avoid a Conservatorship - you can set up a living trust to pass to other trustees when you are incapacitated, eliminating the need for a power of attorney document.
Name guardians for children - since your living trust is primarily about your assets, you cannot appoint a guardian to your children. You can do this in a will.
Name property guardians for children's property - in a living trust, the trustees become the primary guardians for any property left to children until they come of age, and they are only responsible for the property mentioned in yourtrust. In a will, you can choose someone other than a trustee to be a guardian for your children's property, and can expand their rights to include any property left to the children as well as any property they may earn.
Name an executor - your trustee is in charge of your assets if you leave them in a living trust. An executor has this responsibility when appointed to a will. This differences aren't just semantic: an executor's job is to simply wrap up the estate, and ensure it is distributed to where the will decrees. A trustee's job is to manage the assets left in the trust in the interest of the beneficiaries of the trust. Many estates will need both, so it makes sense to create both a will and a trust. You can also name the same person to both positions.
Leave instructions about how to pay bills, debts, or taxes - since a living trust is created primarily for the benefit of the trustees, you should not use it to leave instructions on how to pay debts. A will, which is for the general management of assets, can and should be used for this process.
Simple to make - a will can be made without the help of a lawyer, and require no specialized language. A trust, on the other hand, is more complicated, both because you must outline the trustees duties within the document, and because you must transfer all of your property into the trust.
In short: you should definitely have a will. You should consider a trust if you have an estate of a certain size or complexity, or want to keep your financial affairs private.
Note: these regulations may vary from state to state. If you have additional questions, or would like to set up a trust, consult an attorney in your area.
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