Planning for death or incapacitation can be a difficult subject to discuss. If you have young children or a non-traditional family, it’s one conversation you can’t afford to avoid.
A will or living trust makes arrangements for your estate and medical concerns in the event you cannot manage them yourself (death or incapacity).
So, which do you need? Can they work together? Is one better than another for your situation?
Living trusts and wills do not have to be terribly complicated. In many states, handwritten wills are acceptable (though not advised). They become more complicated if you have significant assets such as property, vehicles, stocks, or multiple potential family and friends who believe they are entitled to your assets.
There are two forms of living trusts, irrevocable and revocable. Irrevocable trusts aren’t as popular because once the papers are signed, they can’t be changed. They typically function as a means of protecting assets from a lawsuit or taxes.
A revocable trust can be changed if you change your mind or as your financial situation necessitates. It offers benefits toward reducing the complexity of distributing assets after the death of the holder.
A revocable living trust is a private contract between the trust entity and trust holder. It helps your beneficiaries by enabling them to avoid probate, the court process in place to distribute the assets after the death of the estate holder. In addition to the protection from probate, trusts are private matters and not a matter of public record.
Conversely, when a will is filed with the court to begin probate, it becomes public record. The assets and finances changing hands are open for anyone to see.
A living trust manages your financial affairs during the end of your life and after death. A will handles affairs when you are gone. Those of advanced age or suffering from illness may consider a living will.
A living will handles your medical affairs should you be unable to advocate for yourself. You can designate whether or not you want to receive life-saving treatments like life support or CPR. This is the only time a living will is necessary.
A living trust allows you to name a successor trustee in the event you become mentally incapacitated. If you have a same-sex partner, this gives your partner rights to advocate for you and your estate. This also applies if you are unmarried but want to designate a friend or non-family member as your advocate.
If you only have a will, the court designates someone to handle your affairs. You can file for a power of attorney to avoid this.
Matters Involving Children
Living trusts allow you to leave property to children. It is illegal for children under 18 to own property so you will have to designate a manager. Only a will allows the estate holder to arrange for their children’s guardianship and property.
Your Estate After Death
To designate property in a living trust, you must transfer the property into the trust. For many items, making a list and attaching it to the trust document is all that’s required. Larger items that have a title document require that you rename the title to the name of the trust.
You will need to name someone to wrap up your estate affairs after you die. In a will, this person is called an executor. They are in charge of managing your assets and distributing them after probate. In a living trust, the successor trustee manages the assets that are only in the trust.
Most estates will require an executor even if most of the property is transferred to the trust. The executor of the will and a successor trustee can be the same person.
Living Trust vs. Will
The proper planning of your estate will protect your assets and your loved one’s rights. Leaving it to the court will often end in disappointment for all parties.
A living trust will help your family maintain privacy. It will also protect the rights of non-traditional family members. Trusts are often a little more difficult to contest in a lawsuit should an issue arise.
A will allows you to make arrangements for young children after your death. You can also designate a manager for any property left to them.
The answer to which you should choose between a living trust vs. will?
A combination of both will provide you with the best options for caring for your estate and your family.
Don’t wait until it’s an emergency to plan your estate. Get started with us today.