Far too many people are under the mistaken belief that a Revocable Living Trust and a Will are the same thing, and are virtually interchangeable. If you are thinking about estate planning, it is important that you understand the significant differences between a Revocable Living Trust and a Will.
Most people believe that only the very wealthy need to set up a trust or leave a will. This is not only a mistaken belief, but it can lead to serious issues, including having all your assets left to someone you would not want them left to. Even those with very modest estates—a home a car and a little money in the bank, along with personal possessions—can definitely benefit from estate planning.
The primary differences between a will and a trust are:
- If you only have a will, it will have to be probated, while property and assets in a living trust do not have to go through probate. Probate can not only take a significant length of time, it can be expensive. In most cases probate is not necessary, but it is still required with a will. If you have a living trust, there is no need for probate, and your assets can be distributed without fees or interference from the state.
- Wills are much simpler documents, requiring no special language, and must be witnessed by two people not named in the will or related to you, and signed by you, the will maker, in front of a notary. Of course wills created by attorney are likely to be more complex, but they are not required to be. Living trusts are, by their very nature, much more complicated. A living trust document must cover the duties of the trustee, and a notary public must notarize the document. Trusts require that you transfer property into the trust, while in a will you just name the person you want to have specific assets.
- A living trust is much more private than a will; a will becomes a public document following death, while a living trust does not. Those who wish to keep their private matters private, might choose a living trust over a will.
- In general, it is much more difficult to challenge a living trust than a will, so if you think there may be those who wish to challenge who you are leaving your assets to, you might consider a living trust.
- In a living trust you are allowed to name any trusted person to have authority over the property in the trust should you become unable to manage your own affairs. You cannot do this with a will, and will have to add a durable power of attorney to appoint someone to manage your affairs should you become disabled.
There are also some instances in which a will and a living trust basically accomplish the same thing, such as:
- You can leave property to your minor children with a will or a living trust. When you use a living trust, the trustee manages the property until the child reaches an age determined by you. If you leave property to a minor in your will, you will either name an adult to manage the assets or you will set up a testamentary trust and name a custodian. Should you fail to name a specific adult in your will who will manage your minor’s property, the state will name someone to take over that task.
- You have the ability to make changes to both a will and to a Revocable Living Trust as situations change. An Irrevocable Living Trust cannot be changed after being finalized.
Neither a will nor a living trust helps much to reduce estate tax and you cannot leave money to a pet in either document, since pets cannot own property. You can use a will to choose a caretaker for your pets or you can create a pet trust. If you do your banking and paying bills online, you should definitely leave your executor a document which lists passwords for your accounts, however these should not be made a part of your living trust or your will. While most people do need a will, not everyone will benefit from a living trust. Take the time now to speak to a knowledgeable estate planning attorney to determine which documents are best suited to your circumstances.