When it comes to protecting your assets and ensuring your wishes are carried out after you're gone, you have two main tools at your disposal: a will or a living trust.
Many people wonder which option is right for them and whether they should look into a revocable living trust form as part of their planning.
Both documents serve important purposes, but they operate in different ways, and choosing the right one can save your family time, stress, and money down the road. Here's how they compare so you can make the best decision for your estate plan.
What Is a Will?
Think of a will as your final set of instructions. It's a legal document that spells out exactly who gets what when you pass away. Beyond dividing up your belongings, a will lets you name guardians for your minor children and appoint someone you trust to handle your estate as executor.
The catch? Your will has to go through probate, a court-supervised process that can drag on for months or even years. While a will is typically the simpler, more affordable option upfront, that probate process can eat into your estate's value and delay when your loved ones actually receive their inheritance.
What Is a Living Trust?
Living trusts operate differently than wills. Living trusts are more than just documents with instructions. They are actually legal entities that may own your assets during your lifetime. You are in control as trustee, and upon passing, your successor trustee will be able to distribute everything in accordance with your instructions without court involvement.
With a revocable living trust form, you then have the ability to amend the trust or revoke it altogether during your lifetime. Using a revocable living trust form avoids probate entirely, which allows your family to receive their inheritance sooner and preserves the privacy of your financial affairs. The tradeoff? Living trusts are generally more complicated to create and generally cost more than a simple will to create.
Benefits of a Will
A will hits the sweet spot for many people, especially those individuals whose financial pictures are uncomplicated. Wills are reasonably simple to create and reasonably affordable. Unless you own real property in multiple states or have a particularly complicated financial picture, a will might be all you need.
You can further enhance the effectiveness of a will by combining it with other tools, like payable-on-death bank accounts, or beneficiary designations on retirement accounts. These assets can go directly to the specified benefactors, avoiding probate, and giving you some of the benefits of a trust without the added complexity.
Benefits of a Living Trust
If you appreciate privacy and want to maximize a seamless experience for your family, a living trust offers some major benefits. Since it avoids probate, your estate information won't be on public record the way it would be with a will, and your beneficiaries will also receive their inheritance much faster, perhaps weeks instead of months or years.
A living trust provides even more benefits if you are the owner of real estate in different states, or a larger estate. A living trust also provides a backup plan in case of incapacity so your successor trustee can manage your assets as you wish without coming into court.
Key Considerations When Choosing
The best option will depend on your particular circumstances. Take into account the complexity of your estate and if you have family matters that might complicate matters. Would you like the details of your financial affairs to become public record or would you like to keep them private? Remember to think about your level of tolerance for complexity and cost up front.
Although a revocable living trust form will take the most work and upfront expense, your family could potentially save money and time. Finally, a trust also requires ongoing effort. You will need to put assets into the trust and maintain it as your life changes.
The Right Choice for Your Future
Will's or living trust's are both valid estate planning tools, and there is no "one-size-fits-all" approach. A will could be perfect for someone next to you, but it may be the wrong tool for you. The essential first step, is to properly assess your needs, assets and family dynamics with honesty.
A lot of people find that they gain confidence in their estate plan by hiring an estate planning attorney and filling out a revocable living trust form. They realize they gain choices to make a plan that best fits their situation and subsequent peace of mind about their family's future.