Living Trust
Living Trust Versus Will
The Difference Between A Living Trust Versus Will
One is often in a quandary as to which estate planning tool to utilize, especially when given the option whether to choose a living trust versus will. As long as you are fully aware of how each one could benefit you according to your needs and preferences, you'll know which one to use.
First, let us try to define a will and a living trust before we weigh living trust versus will.
A will is a document made by a person giving out special instructions with regards to the disposition of his property or assets, also known as an estate, in the event of the person's death.
While a living trust is a legal agreement entered into by a person who gives control of his property to a 'trust' during his lifetime, which will be administered by a designated trustee for the benefit of the beneficiaries stated in the living trust document. Generally, it is legal under living trusts for the grantor, trustee and beneficiary to be one and the same person. However, it should follow that the grantor must identify a successor trustee and successor beneficiaries in the event of death.
What commonly differentiates a living trust versus will is the fact that a will goes through probate while a living trust does not.
Probate is a legal process conducted by the court that involves the inventory and appraisal of an estate of a deceased individual, purposely to settle debts or tax liabilities, before the remainder of the estate is distributed among the beneficiaries of the deceased.
There are advantages and disadvantages of living trusts versus wills, and it will be good to know what these are so that you can make your wise choice as to which one could apply to your needs.
Generally, wills undergo the probate process for an estate that may go on for at least two years, or even more, depending on the size and value of the estate covered. Under probate rules, the court must be sought for permission to buy or sell assets covered in the will and the beneficiaries must wait for the probate process to end before they could receive the remainder of the estate stated in the inheritance.
A living trust works differently as it does not have to go through probate and decisions can be carried out immediately, as well as disposition of payments or inheritance to beneficiaries.
Privacy is also another issue when it comes to living trust versus will. The moment a will goes through probate, it becomes public record and so are the assets listed in the will. With living trusts however, the terms and estate covered are not probated under normal circumstances, thus, it is kept away from public knowledge, unless the trust is disputed or challenged.
Convenience is also one of the considerations to take between living trusts versus wills, Once a will is already approved and executed, there is no need to tinker with it until after the event of your death, or unless circumstances may require for you to change or renew the will.
With living trusts, all assets must be transferred into the control of the trustee during the grantor's lifetime. This will require periodic trips to banks to transfer the accounts, signing of deeds and entitlements and all other processes that may be involved in the administration of the living trust during the validity of the living trust arrangement.
Basically, these are the common issues that differentiate living trusts versus wills. However, the next best step to take before signing up for any of the two is to seek advise or consult an expert on both matters, since it could be very risky to prepare your own will or living trust document.