Planning for your asset management while keeping in mind your own demise is Stressful but at the same time very important for your loved ones.
If you are reading this article, you really care for your loved ones and you are probably on the right track.
Starting your Estate Planning by creating a Living Trust or a Last Will and Testament is the best option if you want a hassle-free and inexpensive process of your assets and Property distribution.
What is a Living Trust
Just Like a Last Will and Testament, Living Trusts are documents created by a person known as a “Grantor/Initial Trustee” who puts property into a Trust and enjoys the benefits of it during their lifetime. Upon the death of the person, the property is managed by another person appointed by the Grantor called a “Successor Trustee”.
The people who inherit the Trust property upon the death of the Grantor are the “Beneficiaries”.
In Living Trust, Grantor has full control over the property and can enjoy the property till he dies by naming himself/herself as the Initial Trustee. After the death of the Grantor, the administration of Trust Property is dealt by the Successor Trustee; in this way, the Successor Trustee works similar to that of an Executor of a Will.
Create your Living Trust online using TrulyWill.
What is a Last Will
A Last Will and Testament commonly referred to as “Will” or “Last Will” is an important legally binding document of Estate Planning which includes how a person's assets, including real estate, personal property, bank accounts, and investments, are distributed after the person dies.
Having a Will helps people to live a stress-free life where they are assured that their loved ones will be protected after their death. With the help of a Will, people make sure that their hard-earned estate is secured.
Last Will enable you to designate a Guardian for your minor children to look after them. This includes food, shelter, education, and medical care. Guardianship of a minor terminates when the minor attains the age of 18 years.
Create your Last Will online using TrulyWill.
Difference Between a Living Trust and a Last Will
The following are the differences between the two documents. Refer to the information provided below the table to understand in detail.
The primary goal of both documents is to distribute the property or assets among the beneficiaries. Naming a beneficiary is essential in both Trust and Last Will.
Probate is a judicial process where inheritors of a person’s assets are recognized by a court of law.
The most important benefit of creating trust is that they avoid probate. The last Will of a person is subjected to probate after he dies.
-Revision of document
A Living trust allows the grantor (the person who creates a living trust) to add or amend the provisions of the living trust.
There is no such provision for revision in the last Will but a person may add a Codicil. A Codicil is a document that is attached to a Will by the testator in order to add, amend, revise, or revoke the provisions of a Will.
In case of valid Wills, the signature of witnesses is necessary whereas a living trust becomes valid after it is signed before a notary public.
-Privacy of documents
Since Last Wills do not avoid probate, they become part of public records after the death of the testator(the person who creates a Will). Living trusts on the other hand avoid probate and no person has the right to view the trust document to check the distribution of assets and other sensitive information.
-Transfer of assets
For a Will to be effective, transfer of assets is not required. Property/assets mentioned in the Will are automatically considered to be a part of the Will whereas, in the case of a Living Trust, a mere signature on the document is not enough unless the trust is funded by transferring assets into it.
-Effective from the date of creation
A Last Will comes into effect only after the death of the Testator whereas a Living Trust becomes effective as soon as it is created by the Grantor and they can enjoy the benefits of it during their lifetime.
Conservatorship is the appointment of an agent by the court to oversee the financial management of a person after death or in case of Incapacitation.
If you are creating a revocable trust, you can avoid conservatorship and your successor trustee will be the person handling and managing everything in your trust on your behalf.
You cannot avoid conservatorship in a Last Will but with a durable power of attorney, you can appoint someone to manage your finances.
For a valid last Will, the signature of at least two witnesses is required in almost every state whereas living trusts do not require witnesses.
-Easy to draft
Last wills can be easily drafted by a person without the help of an Estate Planning Attorney in the presence of two witnesses. Even a handwritten will is valid in several states. Online websites like TrulyWill also provide the last Will template which can be easily filled up and signed by a person to make a valid last Will.
A living trust requires a lot of prerequisites for becoming valid. Mere signing of Trust documents is not enough unless the assets are transferred to it. A signature before a notary public is also mandatory.
-Instructions on payments of taxes and debts
In a last will the testator may specify the assets or property to be used for the payment of taxes and forgive any debts due against him by mentioning it in the last Will. This is not possible in living trusts.
-Guardianship for minors
In a last will you can add a provision for the appointment of a guardian for your minor children. You cannot do this in a living trust. Instead of this, if you have minor children, you might not want them to get ownership of your estate at a young age. You may include it in your trust that you want your minors to receive the property after attaining a specific age. For e.g.at the age of 25 or 30 years.
Will or Trust - Which is Better?
Both living trust and last Will serve different purposes and benefits. It is not correct to say that Will is better than Trust and vice versa.
Whether you need a living trust or a last Will depends upon your needs and requirements. You should first understand your financial and personal situation to decide which one is better for you.
If you are confused, you can connect with an Estate Planning Attorney for guidance and select the best option for you.
Can you have both a Will and a Living trust?
Yes. You can have both documents as part of your Estate Planning to make it comprehensive as both of them serves different purposes and have their own benefits. Trust can help you to avoid probate and estate taxes and Wills, on the other hand, Wills include the provisions for providing guardians for your minor children, executor for your estate, and your final wishes.
You may consider creating both these documents to protect your loved ones because of these Reasons:
- Living Trust never includes everything you own - Trusts become effective only when assets are transferred to it. It is not possible for a person to transfer each and every property you own to the Trust. There might be some property that you acquire shortly before your death and if you do not transfer it to your Trust, it will not be a part of it.
- A Will does things a Trust cannot - A Will can provide several benefits which a Trust cannot. For example, naming guardians for your minor kids, naming an executor for your estate, forgiving debts owed to you, giving funeral wishes, etc. These cannot be included in a Living Trust.
- Avoiding Probate and Estate Taxes - If your main concern is to avoid probate and estate taxes, Living Trusts are the best option. Wills are of no use in this case.