Estate planning is crucial for ensuring that your assets are distributed according to your wishes after you pass away. Two popular estate planning tools are wills and revocable living trusts. Though they serve similar purposes, they come with distinct features and benefits. Let's delve into the differences between the two and the advantages they offer.
What is a Will?
A will is a written document that articulates your wishes concerning the distribution of your assets after you die. Here are some key points to understand about wills:
- Probate: When a person dies with a will, their estate typically goes through a legal process called probate. This process ensures that the will is valid and that assets are distributed as specified. However, probate is a public process, can be time-consuming and potentially expensive.
- Guardianship: A will allows you to nominate guardians for your minor children. If both parents pass away, the court considers this nomination when determining who should take care of the children.
- Flexibility: Wills can be changed or updated at any time before the person's death, as long as the person is mentally competent.
- Privacy: One potential downside is that a will becomes public record once it enters probate. This means that anyone can access and view its contents. These days, most wills are posted on the website of your county Register of Wills office for anyone to see.
What is a Revocable Living Trust?
A revocable living trust is a legal entity that holds and manages assets for the benefit of certain beneficiaries. It's "revocable" because the person setting it up (sometimes called the Trustmaker) can change or terminate it at any time. Think of it as a treasure chest where you put all your valuable possessions, but you keep the keys and retain complete control. Here's what you should know:
- Avoiding Probate: One of the main advantages of a revocable trust is that assets placed in the trust avoid the probate process. This can lead to a quicker and often more private distribution of assets upon the grantor's death.
- Control: The Trustmaker typically acts as the initial trustee and maintains full control over assets in the trust. This means you can buy, sell, or modify assets just like you would if you owned them outside of the trust.
- Privacy: Unlike a will, a trust doesn't become public record upon the grantor's death, ensuring the details remain private.
- Protection in Incapacity: If the grantor becomes mentally incapacitated, the trust can specify a successor trustee to manage the assets, avoiding a potentially lengthy and expensive guardianship or conservatorship process.
- Flexibility: Like a will, a revocable living trust can be changed at any time before the grantor's death or incapacity.
Comparing the Two: Advantages and Considerations
- Privacy and Efficiency: If avoiding public scrutiny and a lengthy probate process is a priority, a revocable living trust has a clear advantage. Transferring assets to beneficiaries can often be faster and more private with a trust than with a will. With many counties posting wills on the internet, it's very easy for anyone to see how much your loved ones received as an inheritance.
- Initial Effort and Cost: Setting up a revocable living trust is generally more involved and costly than drafting a will. However, the potential savings in time and probate expenses after death might outweigh the initial costs.
- Management During Life: With a revocable trust, you can manage assets during your lifetime and provide for a seamless transition in case of incapacity without court intervention. A will doesn't offer this same level of control or protection during one's lifetime.
- Specificity of Wishes: Both tools allow you to be specific about how you want your assets distributed. If you have straightforward wishes, a will might suffice. But if your estate planning needs are more complex, a trust could offer more nuanced control.
- Tangible Personal Property: While a trust can dictate the distribution of most types of assets, it's often simpler to specify distributions of tangible personal property (like jewelry or collectibles) in a will.
Choosing between a will and a revocable living trust depends on personal circumstances, goals, and preferences. While both serve as powerful tools for estate planning, they offer different benefits and potential challenges.
For many, a combination of both—a revocable living trust to avoid probate and manage assets during life, and a will to handle specific bequests and name guardians for minor children—provides a comprehensive solution. Use the link below to schedule a free call with The Law Office of Scott Lynett, Esq. and we'll help you understand which tools best fit your unique needs and ensure that your wishes are honored in the best way possible.