Living Trust vs Will – The Wrong Choice May Leave your Legacy in the Wrong Hands
Picking the best option to protect your legacy starts with understanding the advantages of a living trust vs will. Most people do not enjoy thinking about their death (or possible incapacitation), however, the fact that you are reading this means you understand that it’s wise to plan ahead. This article discusses how your assets are used and distributed as well as who has control over said assets if you have a living trust vs will.
Most of our clients tell us they want to preserve property they’ve worked so hard to create and ensure those assets are passed on to future generations. So how do you achieve this?
First, it is always wise to have a written legal document that outlines how to distribute your estate if you pass away or are unable to handle your affairs because of health issues. Let’s look at how these documents are similar.
Similarities of a Will and Trust
Both are legal documents that, upon your death, outline your wishes for how you want your estate to be dispensed. This is where the similarities end. A will may not be the best option for you and your family. Primarily because it only goes into effect when you die and it does not avoid probate.
So what exactly is a trust?
A living trust, also known as a revocable trust, is a legal document where assets are placed then transferred to beneficiaries at death by an assigned individual known as the ‘successor trustee.’ As a trustee of your trust, you also maintain control of all assets (you may even cancel the trust if you wish) until you pass away or are declared incapacitated.
Living Trust vs. Will – What happens at incapacity
At this stage, having a will is the same is not having a will at all. Unless you have a durable power of attorney in place, the court appoints an individual to oversee your affairs. They must approve all expenses, sale of assets to pay for increased health care, etc.
A living trust leaves your affairs out of court hands (in most states) and your successor trustee carries out your affairs per your wishes that are outlined in the trust.
At Death – Will and Revocable Trust Protections
With a will, everything goes through probate court where the will must first be validated, your debts paid, then your estate distributed per your wishes.
Having a living trust in place allows the ‘successor trustee’ to avoid probate, pay your debts and distribute your estate per your wishes.
Those two scenarios sound the same except for probate… so why does it matter if my estate passes through probate?
A note about your estate passing through probate court
Probate is time consuming. It can take anywhere from nine months to two years before heirs inherit anything from your estate. Unless you have a larger more complex estate, with a living trust this time period is about two weeks.
Court proceedings are public record. With a will, however your assets are distributed becomes public record and available for anyone to see. If you set up a trust, because there is no court, your family can take care of affairs privately.
Living trusts have a drawback or two but we have found (and most clients agree) that the benefits of a living trust vs will outweigh the bad.
Setting up a revocable trust requires a bit more leg work than a will
Because it is more complex, a living trust will require more money to draft.
A draft alone does not mean a trust is complete, you then need to transfer assets to said trust.
You also may need to tie up a few loose ends. For example, if you have a life insurance policy, you will need to change the beneficiary to the trust.
Finally, any additional assets may need to be accounted for in a ‘pour-over will.’ This document handles assets created after the trust but before death.
Everything we’ve outlined today is to help you become more acquainted with your options at this point in life. There is no substitution for proper legal advice. Our senior planning and elder law specialists are equipped to help you prepare for the future and are available to answer questions.
For more information: Contact Senior Care of Michigan below to speak with a Senior Planning Expert.