There are many differences between a Will and a Living Trust. When clients begin the estate planning process, an initial decision to be made is whether to center the plan around one or the other, according to The Northside Sun’s article “Do You Have a Will or a Trust? Why?”
According to the article, the AARP indicates that most people prefer to use a Living Trust.
One of the many differences between a Will and a Living Trust is that a Will operates only after your death. It is simply a set of instructions on who is to receive your assets after you have passed on, and has no legal effect until that time comes. That means if you become mentally or physically incapacitated during your lifetime and are unable to manage your own finances or property, a Will does not help you. That is why a Power of Attorney is so important, because it appoints an agent to stand in your shoes for property and financial matters if you cannot handle things yourself. Unfortunately, if a Power of Attorney is too old, financial institutions may refuse to honor it. In the absence of a recognized Power of Attorney, the family may need to apply to the court for a conservatorship, which can be costly, embarrassing (because it is public), and burdensome.
By contrast, a Living Trust takes effect as soon as it is created and funded. That means, if incapacity strikes, the successor Trustee named in the Trust document is able to immediately handle and manage the Trust property on your behalf and without the resistance from financial institutions that often accompanies the use of a Power of Attorney. That is why our successor Trustees ought to be people that we “Trust,” because they have the power to act as an owner does, but for the benefit of the Trust’s beneficiaries.
Another important difference between a Will and Living Trust is that a Will must go through a court proceeding known as probate before assets can be transferred to others following a death. That is because the Will does not change how you own your property, it just states who is to get it after you are gone. The process of probate can take years and may cost roughly 5% of the value of the assets transferred. A Living Trust, on the other hand, functions without the need for probate court involvement (both in cases of incapacity and at death) because property is actually transferred to the Trust during your lifetime. Since a Trust doesn’t die, court involvement is avoided after a death occurs, and the Trust assets are privately transferred to the next level of beneficiaries following a death, at relatively little expense.
A final significant difference between a Will and a Living Trust is that Wills are public documents. When property transfers through a Will via the probate court process, all details are archived in a court record that is accessible to the public at large. In this day and age, the prospect of our property and who is to receive it becoming publicly accessible information ought to be very concerning. Unscrupulous people can use that information to prey on beneficiaries receiving property in any number of ways.
Unlike a Will, a Living Trust is a private document. It does not become part of a court record after a person dies, and the property owned by the Trust is not information that is accessible to the public. The identity of the beneficiaries of the Trust also remains private and out of the public eye.
Speak with an experienced estate planning attorney to learn how you can use Trusts as part of your estate plan. Trusts don’t have to be complicated to serve your needs. They actually simplify your affairs in a number of ways.
Reference: The Northside Sun (August 14, 2019) “Do You Have a Will or a Trust? Why?”