Both Wills and Trusts are devices which you can use to provide for the distribution of your estate upon your death. Deciding whether a Will or a Trust best fits your needs depends on your circumstances. A living Trust is a popular alternative to the traditional Will, but you should weigh the advantages and disadvantages of each before deciding on one form or the other.
|Probate||Subject to probate proceedings
Out-of-state property requires probate proceedings in that state, as well.
Provides court supervision for handling beneficiary challenges and creditor disputes.
Becomes public record at the time of your death.
|Not subject to probate proceedings
Avoids the cost of a second-state probate proceeding where there is out-of-state property
No automatic court supervision to deal with disputes.
|Tax Savings||Same tax saving provisions available as are available in a Trust.||Same tax saving provisions available as are available in a Will.|
|Management of your Assets||In addition to the Will, must use a Power of Attorney or Conservatorship to manage assets.||Allows you as the grantor to manage the Trust assets as long as you are willing and able.
Makes provisions for a successor trustee to take over in your place.
|Costs||Costs less to prepare a Will than a Trust. Cost to probate a Will can be substantial||Costs more to prepare, fund and manage a Trust than to prepare a Will. But avoids substantial probate costs if all assets were held by the Trust.|
What does a Will Do?
A Will is the legal document that allows you to distribute your property to those you choose. A Will allows you to designate beneficiaries to receive specific items from your estate, and other beneficiaries to receive everything else. For example, if you want your house, your car, or your antique thimble collection to go to a certain person or organization, you designate that person or organization as the beneficiary.
Who’s going to make sure that your antique thimble collection goes to the proper person? The personal representative (“executor”) of your Will. The personal representative is the person you designate to carry out your wishes.
A Will also gives parents of minor children the chance to nominate a guardian. The court makes the final decision when appointing a guardian for your children after your death, but the court will usually accept your nomination. A guardian’s legal responsibility is to provide for your child’s physical welfare.
What does a Living Trust do?
A Will comes into play only after you die, but a living trust can actually start benefitting you while you are still alive. A living trust is a trust established during your lifetime. It is revocable, which allows for you to make changes. You will transfer substantially all of your property into your living trust during your lifetime, and any omitted assets can be transferred into the trust at the time of death through the use of a simple “pour-over” will. You should always make a “pour-over” will at the time that you establish your trust.
A living trust will be used as the mechanism to manage your property before and after your death, as well as provide how those assets, and the income earned by the trust, are distributed after your death. If you should become incapacitated or disabled, the trust is in place to manage your financial
affairs, usually by a successor trustee, if you were serving as trustee. A living trust is not subject to probate, and therefore, all provisions of the trust will remain private.
Joint living trusts are also possible. They simply combine the assets of a husband and wife into a single trust, governed by a single trust document. However, if estate tax minimization is important (for combined estates which will exceed $1 million), the joint living trust must be very carefully drafted with the help of an attorney in order to achieve the desired goals.
What happens if I don’t have a Will or Living Trust?
The legal term for dying without a Will is dying intestate. If you do not specify through a valid Will or Living Trust who will receive your property, state law controls and generally distributes your property to your spouse and/or your closest heirs. This may or may not be what you intended. Furthermore, if you fail to nominate a guardian for your minor children, the state could appoint someone you don’t trust as a legal guardian of your minor children. Finally, by failing to appoint someone to carry out your wishes, the state can appoint anyone to be the administrator of your property, and the administrator may have to pay certain fees or post a bond at the expense of your estate, before he or she can begin to distribute your assets.