You're trying to create a legal document that will control who will inherit your property after you die. Both wills and trusts allow you to arrange distribution of your assets upon your death. But what legal effects do different types of wills and living trusts have? Deciding between a living trust and a will depends on your personal concerns and what you want to achieve from estate planning. Read on to find out how living trusts and wills differ.
What Are Living Trusts and Wills?
A will is a legal document that describes your estate and a person or an entity that will receive your property. Depending on your wishes, you can also include any special instructions about care of your minor children, gifts to charity, and formation of posthumous trusts.
On the other hand, a living trust (also called an inter vivos trust) is created by a grantor and managed by a trustee for the benefit of other person or entity (called the beneficiaries). Living trusts can be either revocable or irrevocable. Irrevocable living trusts permanently relinquishes the right to make changes after the trust is created. Revocable living trusts can change or revoke the terms of the trust anytime during the grantor's life. However, upon the grantor's death, the trust becomes irrevocable.
Differences Between Living Trusts and Wills
You should weigh the pros and cons of a living trust and a will before creating them. There are several distinct factors and requirements for living trusts and wills.
Becoming Effective During Your Lifetime
Unlike a will, which comes into play only after you die, a living trust can be changed during your lifetime. After creating a living trust, you can transfer or omit certain assets as you wish. You can also use a pour-over will at the time you establish your trust to have any assets transfer into the trust upon your death.
Subject to Probate Proceedings
Probate is a court-supervised process that deals with your assets and debts left behind after you die. Any assets passing through the will require probate. The parties will have to go to the probate court for any matters regarding estate administration, such as proof of the will's validity, beneficiaries' challenges, and creditor disputes.
On the other hand, a living trust is not subject to the probate proceedings. Upon the grantor's death, a trustee can immediately manage the assets or funds involved in the trust and distribute them to the beneficiaries. However, probate may be necessary to limit creditors' claim.
Private Information vs. Public Record
Once a will is submitted to the probate court, the information goes public. People can go to court and look up assets owned by a specific testator. As opposed to wills, information about living trusts do not go public. Only the beneficiaries have access to the trust documents and the information remains private. Trust records will go public only if the testator's heirs or any parties file a lawsuit to challenge the trust.
Notarized vs. Witnessed
Unlike wills, living trusts must be signed and notarized. However, on the other hand, a will needs to be witnessed by two people, who are not benefitting from the will
Required Costs and Fees
A will involves costs and fees associated with the probate proceedings that can get expensive. On the other hand, a living trusts can avoid those probate costs.
Get a Free Initial Legal Review
Both living trusts and wills allow you to determine how to distribute your assets after your death. But understanding the differences between living trusts and wills can be quite difficult. Because they have different legal effects, it's critical to choose your estate planning wisely. Get a free initial case review by an experienced attorney in your area to choose the best option for your estate planning.