Facing the reality of death or incapacitation can be challenging, but it’s essential to have these conversations, especially if you have young children or a non-traditional family structure. Ensuring your wishes are respected and your loved ones are protected is where estate planning comes into play.
Both a will and a living trust can help you manage your estate and medical concerns if you’re no longer able to do so yourself. But how do you know which one is right for you? Is a living trust necessary? How do you set up a will? Can a will and living trust be used together?
To make an informed decision about estate planning, consider consulting with a knowledgeable estate planning attorney in New York. At New York Legacy Lawyers, our team of skilled Brooklyn estate planning lawyers can assist you in selecting the most suitable option and creating a comprehensive plan tailored to your needs. Contact us today at (718) 713-8080 to schedule a consultation.
What is a Living Trust?
A living trust is a legal document created by the grantor, the individual who contributes assets to the trust. The objective of a living trust is to maintain ownership of your assets during your lifetime. The general strategy involves moving as many assets as possible into the trust, although certain assets like life insurance and retirement accounts are not eligible for inclusion. Once placed in the trust, these assets are administered for your advantage throughout your lifetime.
The responsibility of managing the trust falls upon a trustee of your choice. While you have the freedom to appoint anyone as the trustee, it is common to designate yourself for full control. In addition, you can also name a successor trustee who takes over the role after your passing. Once you pass away, the trustee maintains management and protection of your assets and subsequently allocates them to your designated beneficiaries.
One advantage of a living trust is its capability to avoid probate. Probate involves court procedures for validating and executing a will, which can be a time-consuming process that can take several months and become expensive over time. However, a trust can eliminate the need for probate while also allowing you to orchestrate an immediate distribution of your assets through the trust terms.
If you’re curious about the intricacies of living trusts and how they can help you achieve your estate planning goals, it is crucial to seek guidance from a skilled New York estate planning lawyer. At New York Legacy Lawyers, our attorneys can help you understand how a living trust works and guide you through the process of establishing one that is tailored to your unique needs. We can provide clarity and peace of mind for your estate planning journey. Contact us today to discuss your specific situation and ensure that your assets are protected for the future.
Living Trusts and Wills: Essential Differences in Estate Planning
Understanding the differences between living trusts and wills is essential in estate planning. Both tools have unique features and benefits that can significantly impact how your assets are managed and distributed. Recognizing these differences helps ensure your estate is handled as you intend.
Complexity
Living trusts and wills don’t have to be overly complicated. Complexity arises when significant assets, such as property, investments, or vehicles, are involved, or when multiple individuals may claim entitlement to your estate.
Living trusts come in two types: revocable and irrevocable. Irrevocable trusts are less common because they cannot be altered after they are established. They are often used to protect assets from lawsuits or reduce tax liabilities.
Revocable trusts, on the other hand, provide flexibility. They can be modified to reflect changes in your financial situation or personal preferences. This type of trust can also simplify the process of asset distribution after the trust holder’s passing.
Privacy
A revocable living trust is a private agreement between the trust entity and trust holder. It helps your beneficiaries by allowing them to avoid probate,, the court process used to distribute assets after the estate holder’s death. In addition to the protection from probate, trusts also offer privacy, as they are not part of the public record.
Conversely, a will becomes public record once it is filed with the court to initiate probate. This means the details of assets and finances being transferred are accessible to anyone who wishes to view them.
Health
A living trust manages your financial affairs both during your lifetime and after your death, while a will only takes effect after you have passed. Individuals who are elderly or facing illness may also consider creating a living will.
A living will handles your medical affairs if you are unable to speak for yourself. It allows you to specify whether you want to receive life-saving treatments, such as CPR or life support. This type of document is only necessary for these specific situations.
A living trust allows you to name a successor trustee to manage your finances if you become mentally incapacitated. This can be especially important for same-sex partners, unmarried individuals, or those who wish to designate a friend or non-family member to advocate on their behalf and handle their estate.
Without a living trust or power of attorney, the court will appoint someone to manage your affairs, which may not align with your preferences. Filing for a power of attorney can help ensure your wishes are respected.
Matters Involving Children
Living trusts allow you to leave property to children, but since minors under 18 cannot legally own property, a designated manager must be appointed to oversee it. Only a will allows you to arrange both guardianship for your children and the management of their property after your passing.
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 also need to appoint someone to handle your estate affairs after your death. In a will, this person is called an executor. They are responsible for managing your assets and distributing them after probate. In a living trust, the successor trustee handles only the assets placed in the trust.
Most estates will still require an executor, even if the majority of property is transferred to a trust. The same person can serve as both the executor of the will and the successor trustee.
Choosing between a living trust and a will depends on your personal circumstances. Carefully considering the advantages of each option will help you make informed decisions that align with your estate planning goals and provide peace of mind for the future.
| Factors | Living Trust | Will |
|---|---|---|
| Complexity | Two forms: irrevocable and revocable. Revocable trusts can be changed while irrevocable trusts can’t be changed once papers are signed. | Handwritten wills are acceptable, but not advised. It can become complicated if there are significant assets or multiple potential beneficiaries. |
| Privacy | A private contract between trust entity and holder, and helps beneficiaries avoid probate. | Becomes public record when filed with the court for probate. |
| Health | Manages financial affairs during the end of life and after death. Allows naming of successor trustee if mentally incapacitated. | Handles affairs after death. Living will necessary for medical affairs if unable to advocate for oneself. |
| Matters Involving Children | Allows leaving property to children, but requires a designated manager as children under 18 can’t own property. | Only a will allows for arranging children’s guardianship and property. |
| Your Estate After Death | Property must be transferred to the trust. Large items require renaming of the title to the trust’s name. Successor trustee manages assets in the trust. | Executor manages assets and distributes them after probate. Most estates require an executor, even if property is transferred to the trust. |
Difference Between Trust and Will
Wills and trusts are legal documents that are commonly utilized for transferring assets to loved ones after one’s death. Despite sharing some similarities, such as the ability to modify or revoke them during one’s lifetime, the primary difference between these documents lies in their approach to asset distribution among beneficiaries.
A will, also known as a last will and testament, designates an executor to manage the distribution of assets after death. In addition, a will can also serve to appoint a guardian for minor children and outline funeral arrangements. However, a will must go through the probate court process in order to be legally binding. This involves the court assessing the value of the property left by the will and approving its distribution to beneficiaries. Unfortunately, probate can be time-consuming, expensive, and public, as the details of the estate become part of the public record.
On the other hand, a trust establishes a relationship between the assets of the owner and a trustee who manages them for the beneficiaries. Assets placed in a trust bypass probate, reducing court costs and the time required to receive inheritances. Furthermore, trusts are private documents that cannot be viewed by anyone outside of the trust, making them ideal for those concerned with privacy.
Trusts offer greater control over the distribution of funds, particularly for those with minor children, numerous beneficiaries, or concerns about their heirs’ spending habits. For example, an individual may opt to distribute a child’s inheritance over time to prevent overspending, or delay the distribution of assets until the heir reaches a specific age. Trusts can also be beneficial in supporting someone with special needs without affecting their eligibility for government benefits.
Revocable Trust vs. Will
When planning for the future management and distribution of your assets, deciding between a revocable trust and a will is crucial. Both serve the purpose of guiding the transfer of your assets to your heirs, but they operate differently and offer distinct benefits.
A revocable trust is active immediately upon creation. This means the designated trustee, potentially you, manages your assets right away for the benefit of your beneficiaries. This setup not only provides a smooth transition of asset management without court involvement but also offers privacy, as the contents of the trust do not become public record. Importantly, you can modify or dissolve a revocable trust at any point during your lifetime, provided you are mentally competent.
A will, on the other hand, is a document that only takes effect after your death. It outlines who will inherit your assets and may include provisions for the guardianship of minor children. The execution of a will requires probate, a legal process that validates the will and oversees the distribution of the estate. This process is public, which means the details of the will can be accessed by others. Like a trust, a will can be changed at any time during your life.
Choosing between a revocable trust and a will depends on your personal circumstances, including your privacy preferences, the complexity of your assets, and your goals for how and when your heirs receive their inheritance. Consulting with a New York estate planning attorney can help clarify which option best aligns with your needs.
Can You Have Both a Will and a Living Trust?
Many individuals wonder if they can incorporate both a will and a living trust in their estate planning strategy. The answer is affirmative, and it can even be advantageous in specific situations. By combining a will and a living trust, individuals can ensure that their assets are distributed according to their preferences and their loved ones’ future necessities are fulfilled.
A living trust can provide more security to those who wish to evade probate or have minor children who might not be capable enough to manage their inheritance prudently if they receive it as a lump sum at a young age. On the other hand, a will permits the nomination of a guardian for underage children, which is not possible with a trust.
A suggested approach is to use a will to finance the living trust with any assets that were not previously included in the trust before death. A “pour-over” will directs that any assets outside the trust at the time of death be shifted to the trust, which will be supervised by a successor trustee for the beneficiaries’ advantage. This strategy guarantees that the assets intended for children are managed according to the creator’s directives.
To determine the most suitable course of action for your unique circumstances, consulting a competent estate planning attorney in New York is highly recommended. They can provide assistance with wills and trusts, helping you create a plan that addresses both your needs and those of your loved ones. Contact us today to schedule a consultation.
Living Trust vs. Will: A Look into the Best Choice for Your Situation
58% of Baby Boomers (ages 53-71,) and 81% of those 72 or older have a living will or trust. They already see how smart it is to begin planning for the fact they will not be around forever. Likely this planning is tinged with years of experience watching family and friends go through the confusion and disputes that often arise over assets and estates when the original owner of them passes without making their wishes known.
One estate planning tool that many of these baby boomers have turned to, and that many more are looking at, is a living trust. A living trust and a last will & testament often go hand-in-hand. Here’s what you need to know about how they compare. Reach out to us at the New York Legacy Lawyers to consult with a skilled New York estate planning lawyer. Discover valuable estate planning tips and determine whether a will or trust is the best option for your situation.
Probate Is Different Than a Trust or a Will
Unlike a will, a living trust is something you can use and benefit from while you are still alive. In a living trust, you transfer some or all of your assets into the trust (as the grantor), then you manage the trust as the trustee, and receive the benefits of the trust as the original beneficiary. Knowing that you may become incapable or unfit to manage your assets (trust) one day, you can designate someone to be responsible for your property if and when you become mentally or physically unable to do so. When you pass away, a successor trustee becomes responsible for carrying out the intent of the trust to whichever beneficiaries you’ve designated.
You and your spouse will likely want to be co-trustees while you are still alive, maintaining full control of your assets. Your spouse can take over if you become incapacitated.
Most couples name their children as successor trustees in the event of their death. If they are uncomfortable with this arrangement, they can appoint a professional to oversee their assets.
While you are alive, your living trust can be altered or dissolved at any time.
Both a will and trust give detailed inheritance instructions, and allow you to designate someone to oversee the distribution of your assets. With a will, however, your document will likely go through probate. This process can take months and become costly if it is contentious. Your assets will be tied up during this time.
With a living trust, the parts of your estate in the trust will not pass through probate court. Instead, the person you have designated as your trustee will carry out the requirements you outlined in the trust.
Opacity = Trusts | Transparency = Wills
Official documents, such as a will, and those that go through probate, become a part of the public record. Living trusts will not be subject to public scrutiny unless a beneficiary or trustee demands court approval. Many people prefer that their wishes remain a private matter and a trust is a great way to keep the value and assets of your estate confidential.
Why would that matter? Imagine you’re leaving $2 million for your 15-year-old son to inherit when they turn 20 years old. You can imagine some people will want to share their ideas on how to spend $2 million with anyone new to that kind of cash on hand. Or worse, if you wanted to leave that $ to your son, but your estranged sister knew about it and preyed on their guilt to siphon some of it away.
These are only two scenarios, the point here is that the fewer people you have poking around your estate and knowing who received what, the better-off the beneficiaries are likely to be.
For Estates of a Certain Size, Tax Planning Is Critical
Many folks with larger estates can take advantage of tax exemptions by dividing their assets smartly. Trusts and wills have very different tax exposure risks. Make sure you choose to work with an estate planning attorney that knows about how taxes will affect your estate.
401k and Life Insurance
Many couples have a 401K or life insurance policy that they would like to leave to their children, if they do not reach the age of retirement. If you have a will, those funds would go into the hands of a court-approved guardian until your child reaches the age of 18.
With a revocable living trust, however, a trustee can accept these funds in the event of your death. You can decide if your child receives them at age 18, 25, or 30, or through some other manner other than age.
Working with an Experienced Brooklyn Estate Planning Attorney
Understanding the difference between a living trust and a will is essential when planning how to manage and distribute your assets. A living trust offers flexibility during your lifetime, allowing you to control your assets and avoid probate after death. In contrast, a will only takes effect after your passing, detailing how your estate should be distributed and naming guardians for minor children. Both tools have unique advantages, and selecting the right one depends on your specific goals and circumstances.
At New York Legacy Lawyers, our skilled Brooklyn estate planning lawyers can guide you through the decision-making process to help create a plan that reflects your needs and priorities. Whether you are focused on avoiding probate, providing for your loved ones, or achieving peace of mind, professional guidance can simplify the process. Contact us today at (718) 713-8080 to schedule a consultation and take the first step toward securing your estate plan.
