Clients often ask me “what is the difference between a basic will and a revocable living trust?” And they also ask “which one do I need?” It is important to know the differences between a revocable living trust and a will. Not everyone needs a living trust.
Revocable living trusts and basic wills both allow you to name beneficiaries to receive your property after you pass away. They are useful estate planning devices for different purposes. The most important difference is that a living trust allows you to avoid probate – a will does not avoid probate. While a living trust is more complicated to prepare than a basic will and requires more work to complete than a basic will, there are significant benefits to preparing and funding your living trust that may make it the best estate planning choice for you, your spouse and your family. Unlike with a basic will, a living trust can protect thousands of your hard-earned dollars, provide for your surviving spouse, protect assets from inheritance taxes, reduce the amount of time it will take your loved ones to administer your estate and protect your privacy. Simply put: a will is easier to prepare, but a living trust gives you more protection.
Comparing a Living Trust and a Basic Will
Here is a comparison of some of the top ten most important things wills and living trusts can and cannot do:
- Name beneficiaries for your property (both)
Revocable Living Trusts – can be easily done in your living trust and does not require probate
Wills – can be easily done in your will but may require probate
- Leave property to minor children (both)
Revocable Living Trusts – separate trusts can be set up within your living trust for the benefit of your minor children
Wills – a will can have a “testamentary trust” for minors that are established by the court at your death for the benefit of your minor children
- Revise/update your document (both)
Revocable Living Trusts – trusts can always be amended during your lifetime
Wills – wills can always be revised or updated with codicils
- Avoid probate (Trust only)
Revocable Living Trusts – your assets that are transferred into your living trust avoid probate
Will – assets that pass through your will do NOT avoid probate
- Keep privacy after death (Trust only)
Revocable Living Trusts – trust protect your family’s privacy from public record
Will – wills do NOT protect family privacy as a will is public record that anyone can access at the courthouse
- Requires transfer of property (Trusts only)
Revocable Living Trusts – your assets must be transferred into your living trust (this is called “funding”)
Wills – wills do NOT require formal transfer of property into your will, which is why your will must be probated so the court can oversee distribution
- Protection from court challenges
Revocable Living Trusts – trusts are much harder to challenge
Wills – more likely to be challenged and easier to contest
- Avoid the need for a conservatorship
Revocable Living Trusts –If you become incapacitated, your successor trustee can manage your trust assets without the need for a conservatorship
Wills – with a will (if you do not have a Durable Power of Attorney) someone will need to go to court to be named your conservator if you become incapacitated
- Name guardians for children (Will only)
Wills – guardians for minor children can only be named in your will
- Ease of preparation
Revocable Living Trusts – More work required to prepare and transfer assets into your living trust
Wills – much easier to prepare and does not require transferring assets
The most important thing to remember when trying to decide which estate planning device is best for you is that property left through a living trust does not pass through probate; property left through a will must go through probate. Probate takes a long time, can be very expensive, and for most estates, can be avoided with proper estate planning that includes a living trust.
Because property passing through a living trust does not have to go through probate, it can be distributed to beneficiaries after the death of the grantor, with minimal fees or court interference. For this reason, many people chose to create a living trust.
Do I Need a Will or a Living Trust?
Most people need a will, but not everyone needs a living trust. Whether you need a living trust depends on your age, your assets, and your personal circumstances. Even if you decide that you need a living trust, you will also need a will to name an executor, name guardians for minor children, and take care of any property that is not transferred into your living trust (this is called a “pourover will”).
For a free initial estate planning consultation and more information on living trusts, basic wills, pour-over wills and preparing your comprehensive estate plan, contact our offices at (760) 673-7600.