Living Trust

Wills and living trusts are two legitimate estate planning tools that allow for a legal distribution of properties and assets of a person in the event of death. However, both have significant differences in legal procedures and nature of implementation.

Differentiating a will from a living trust is important for one to be able to identify which estate planning tool to use, depending on one's needs and circumstances. Weighing the advantages and disadvantages could help guide a person which path to follow when deciding between a will and a living trust.

A will is a legal document which is executed by a person to distribute specific property or wealth to a person, group of persons or an institution, depending on a person's choice, referred to as beneficiaries. The will must state which items the beneficiary may receive in the event of death of the person who made the will, and for all other remaining properties for the rest of the beneficiaries, should there be any.

A living trust is one that starts benefiting a person even while the one who made it, also known as a grantor, is still alive, since a living trust is established during the grantor's lifetime. It is a revocable document that can be changed or cancelled at anytime. All properties or assets may be included in a living trust and anything that may not have been included during the initial drafting procedure can also be transferred into the trust at the time of death as long as there is a pour-over will.

A pour-over will can be created upon establishing the living trust document.

The living trust can authorize a designated trustee - by choice of the grantor - to manage the estate included in the living trust while the grantor is still alive or even after the grantor has passed away. The trust manages the estate, by providing for how those assets or even all income derived from the management of the assets, are distributed after the grantor's death.

In the event of permanent disability of the grantor, the trust can also manage the financial assets to generate income, either by designated successor trustee or financial adviser.

Another thing that differentiates wills and living trusts is probate.

A will is subject to probate, where state law applies to estates that wills have to go through. The probate proceedings will conduct a court-sanctioned inventory of appraisal of all properties and assets included in the estate for tax or debt-related issues, settles it and then distributes the remainder of the estate to all designated heirs. Probate also mandates court supervision - during probate proceedings - for handling disputes raised by creditors or challenges posed by listed beneficiaries, making it a public matter upon the time of death.

A living trust, on the other hand, is not subject to probate, according to state laws; thereby no court supervision is required, thus making it a private matter all throughout the validity of the trust arrangement.

A will also needs to have a Power of Attorney or Conservatorship if the person who made it decides to have the assets managed, while a living trust can allow the grantor to be the trustee to manage the accounts, as long as the trustee is willing and able to manage the assets. In the event of death or total disability, a grantor-trustee may designate a successor trustee to manage the assets on his behalf.

Lastly, wills cost less than living trusts to make, however, costs begin to substantially increase during probate proceedings. Although living trusts will cost more than a will in the beginning, it avoids costs that may be incurred during probate proceedings.

Wills and living trusts will help one manage his estates, but don't just jump into the water without first weighing which one will best serve your needs and intentions for your assets and properties. One good advise, consult a legal expert before deciding to prepare one.

Living Trust Agreement |