Let’s Talk Wills and Living Trusts: What’s the Deal?
Everyone has heard the terms “Will” and “Trust,” but not everyone knows the difference between the two.
Wills and Trusts are Estate Planning tools to help distribute your estate after you pass away.
A Will is a written document expressing your wishes and only becomes active after death. A trust, on the other hand, is active the day you create it.
What’s a Living Trust?
Like a Will, a Trust is used to transfer property after death to loved ones. It’s called a Living Trust because it is created and active while the Trustor (property owner) is still alive.
Almost anything of value can be placed in a trust. Think real estate, vehicles, accounts, fine art & jewelry, etc.
How Does a Living Trust Work?
Once established, the Trustor must transfer ownership of their assets and possessions into the trust. We call funding the trust, and I can’t explain how crucial this step is.
The Trust document will also name a Trustee. This might be a relative or a professional. Either way, their job is to oversee the instructions of the trust contract are carried out.
Trustors can add conditions like, a grandchild graduating college before receiving their inheritance.
How Is a Living Trust Different from a Will?
- Privacy: Wills become a public document as soon as you pass. On the other hand, only beneficiaries of a trust will know how the estate is distributed.
- Probate: Wills are subject to probate, whereas a Living Trust can help your heirs avoid this lengthy and costly process.
- Minors: Only a Will can appoint a guardian for your children.
Pros of a Living Trust:
- Save time and money in the probate process.
- Offers more protection if contested or challenged.
- Trusts are totally private, per the Trustor’s wishes.
Cons of a Living Trust:
- The data gathering and reviewing phase can take a lot of time.
- Retitle and re-deed process. The trust is no good if your assets and possessions are not titled to it.
- Attorney fees: most attorneys bill hourly and can add up quickly. (It’s still cheaper than probate)
Estate Planning can feel overwhelming. Just remember, you don’t have to figure this out alone.
Work with your team of trusted, fiduciary advisors to create the best plan for you and your family.