A trust and a will are both documents that can help you get your estate in order in the event of your passing. Making a decision between creating a revocable living trust and a last will and testament can seem like a mountain of a process if you don’t understand some key differences between the two.
What is a Will?
A last will and testament is one of the key documents when forming an estate plan. It is the document that will explain to your beneficiaries and living heirs what you want to happen with your assets, property, and other issues in the event of your death. When preparing a will, there’s a chance that your assets will go into probate, a process that varies state-to-state but involves a court-supervised division of your assets. When you create a will, you appoint an executor of your estate who will supervise this process for you.
What is a Revocable Living Trust?
A revocable living trust is similar to a will in that it outlines your last wishes, but it places them in the hands of a trustee. Planning your estate this way avoids the probate process. The way it works is like this: You transfer ownership of your assets to the trust (and the trustee appointed to it) before you die. If you do not fund an asset in your trust, the will then catches the unfunded property and transfers it to the trust upon your death.
What If I Miss Something?
Oftentimes, you’ll want to create a will just to stay on the safe side, which is known as a pour-over will. It makes sure that any assets left outside of your trust will still be passed on according to your wishes. It serves as a catch-all for your assets.
The good news is that, if you so choose, a revocable living trust is just that: revocable. You can change your mind and pull your assets out of the trust should you so choose. But there are some advantages to using a trust over a will.
Is One Better Than the Other?
The answer to this question lies with you, your specific needs, and the advice of your lawyers, but there are a few things to consider:
A trust avoids probate.
Probate is essentially the state stepping in to make sure that your will is valid, debts paid, and beneficiaries inheriting what you left to them. It gives people an opportunity to contest your will and creditors the chance to have any debts paid as well. The process itself can be time consuming and costly, causing your loved ones to do some work following your death.
A trust is private.
When your estate goes through probate, every record is public. Anyone who wishes to do so could go to the courthouse and get the details of your estate, your will, and every document that your executor files with the court. In some states you can even find these filings online. Trust documents are not filed with a court and therefore don’t become part of the public record. It is simply another way to protect your beneficiaries.
A trust can benefit you before death.
Should it happen that you are incapacitated before your death, a revocable living trust has you name a successor trustee who will step in and manage the trust in your place should this happen. So there’s no question about your wishes, beneficiaries, or anything else without the interference of the court.
Trusts are more expensive upfront.
Though you’ll avoid probate costs, it generally costs more money (not to mention time) to create a trust. Titles must be transfered, new deeds created, and institutions notified to ensure that all of your assets are successfully placed into the trust. All of your assets must be fully funded into the trust in order for the trust to avoid probate. Any accounts in your name, stocks and bonds, investments, and insurance accounts all have to be changed to reflect the beneficiaries. It can be a time-consuming and costly process upfront, but if done correctly will save your loved ones money in the long run.
Thinking about estate planning? Choosing how best to protect and distribute your assets can feel overwhelming, but not if you have someone to guide you through the process. Call a estate planning attorney O’Fallon, Missouri trusts today to get started.
Thank you to our friends and contributors at Legacy Law Center for their insight into estate planning and trusts vs. wills.