Understanding the Differences Between Wills and Living Trusts

I know that I've posted this one before, but I feel that is so crucial that everyone be very clear on the differences between these two things so that you aren't taken by surprise and out of pocket a lot of money for a probate attorney. That said, I would like to say that I am not an attorney, and this is not legal advice. This is just information that can be found using our dear friend, Google, and by talking to estate attorney's. If you're in need of a good one, let me know, I have a few names I can pass along. ;-)

Creating an estate plan is a crucial step in ensuring that your assets are distributed according to your wishes after you're gone. Two common tools in estate planning are wills and living trusts. While both serve the purpose of distributing assets, they operate differently and cater to distinct needs. In this blog post, we'll delve into the key differences between wills and living trusts, helping you make an informed decision about which option is best suited for your unique circumstances.

1. Definition and Function:

Wills: A will is a legal document that outlines your wishes regarding the distribution of your assets upon your death. It allows you to name beneficiaries, appoint an executor, and specify how your property should be distributed.

Living Trusts: A living trust, on the other hand, is a legal entity that holds and manages your assets during your lifetime and allows for the seamless transfer of these assets to your beneficiaries after your death. Living trusts can be revocable or irrevocable.

2. Probate Process: Wills: Wills often go through a court-supervised process known as probate. Probate is the legal validation of the will, and it involves the distribution of assets, payment of debts, and resolution of any disputes. This process can be time-consuming and may incur additional costs.

Living Trusts: Living trusts bypass probate, allowing for a more streamlined and private distribution of assets. Since the trust holds legal title to the assets, there is no need for court involvement, resulting in quicker and more cost-effective asset transfers.

3. Privacy: Wills: The probate process is a matter of public record, meaning that the details of your will, including asset distribution and the names of beneficiaries, become accessible to the public.

Living Trusts: Living trusts provide a higher level of privacy as they operate outside of probate. The details of the trust, including asset distribution, remain private and are disclosed only to the relevant parties involved.

4. Flexibility and Control: Wills: Wills are flexible and can be easily amended or revoked as long as the individual is mentally competent. They are suitable for individuals with straightforward estate planning needs.

Living Trusts: Living trusts offer greater flexibility and control, especially for those with complex financial situations. You can make changes to the trust during your lifetime, and the trust can provide for the management of assets in case of your incapacity.

5. Cost Considerations: Wills: While drafting a will is generally less expensive than creating a living trust, the costs associated with probate (court fees, attorney fees, etc.) can accumulate.

Living Trusts: Although the initial cost of establishing a living trust may be higher, the potential savings in probate costs make it a cost-effective option in the long run.

Choosing between a will and a living trust depends on your specific needs, assets, and preferences. Consulting with an experienced estate planning attorney can help you navigate the complexities of both options and ensure that your estate plan aligns with your goals. Whether you opt for a will or a living trust, taking the time to create a well-thought-out estate plan is a crucial step in securing the future for yourself and your loved ones.