Most clients understand the importance of having a written legal document that provides instructions for distributing your assets after your death. But, which type of legal document should you choose, and why? If you are contemplating whether to create a will or a living trust, here are three benefits of a living trust that you should consider.
How a living trust is different from a will
Both a living trust and a last will and testament involve the distribution of assets, however, they are different in many other respects. A living trust, also referred to as an “inter vivos” or “revocable” trust, provides for the placement of your assets into a trust for your benefit during your lifetime, and then transferred to designated beneficiaries upon your death. On the other hand, a will is basically a plan of distribution of your assets upon your death, which does not include a trust. The main difference is that, nothing in your will can take effect until after you die.
The benefit of avoiding probate
One primary benefit of creating a living trust is that it can allow you to avoid the lengthy and costly probate proceeding. Having a valid will means that your estate must go through probate, so that your assets can be distributed according to your wishes. But, with a living trust, your estate will not go through probate, so there can be a quicker distribution of your assets to your heirs.
The benefit of saving money
Initially, drafting the living trust will cost more than drafting a will, simply because a trust is a more complicated legal document. Additionally, the assets must be transferred to the trust, referred to as “funding the trust,” which requires additional paperwork. Yet, while the will may cost less to draft, the living trust will most likely save your estate money at your death. Because your estate will be distributed through the trust, as opposed to probate, your estate will avoid the costs of probating your will.
Living trusts hold up better to contests or disputes
Another way that a living trust may save money relates to contests or disputes. A living trust is generally more likely to hold up to someone contesting the distribution of your assets. The more involved a will contest is, the higher the court costs will be. You may be able to save costs with a living trust, when it comes to disputes.
The benefit of providing more privacy
Another major difference between a will and a living trust is the degree of privacy that a living trust provides. Living trusts are not made public after your death, so your estate can be distributed privately. A will, on the other hand, remains a public record. That means that all of the transactions flowing from the will are public, as well.
Other benefits living trusts provide
In addition to the three primary benefits, a living trust is drafted so that the trustee will be able to take over automatically, in the event you become ill or incapacitated. However, if you have a basic will, without incorporating a durable power of attorney, the court will be required to appoint someone to oversee your affairs. That person will be required to obtain approval from the court for transactions such as paying expenses, selling property, and others. If you create a durable power of attorney, for both your finances and your health care, then you may be able to avoid a court-appointed conservatorship. But, with living trusts, you can choose your own successor trustee to manage your affairs, without the need for court intervention. Because the trust is revocable, you can retain control of the trust.
The choice is ultimately yours
While, in many cases, a living trust is a sensible choice, a will may be just fine in other situations. One common rule of thumb is that, the larger the estate, the greater the need to create a living trust. This, of course, is not always the case, so discuss your needs with your estate planning attorney before making a final decision.
If you have questions regarding a living trust, or any other estate planning needs, please contact the Schomer Law Group for a consultation either online or by calling us at (310) 337-7696.