It’s commonly understood that it makes sense to have some form of written document that details how your assets will be divided up and distributed after you pass away. However, there are some important differences between the two concepts.
A living trust, which is often referred to as a “revocable” trust, is a binding legal document that places your assets into a trust while you are still living. When you die, your successor trustee (who you designate in your living trust) distributes your assets according to your wishes.
Conversely, a Will accomplishes the same goal — distributing your assets after you pass away — through an executor (the equivalent of the successor trustee in a living trust). The main difference between the two is that with a will, nothing happens until your death.
Current estimates peg the number of Americans who have a living will at about 20%. The obvious question is whether you should join that one-fifth of your fellow Americans and have a living trust set up.
The most important benefit to most people of having a living will is the caveat that it avoids probate. What this means is that a great deal of time is saved — the time that it takes to distribute your assets is measured in weeks with a living will, as opposed to months or even years with a traditional will.
Although this facet is dependent upon your financial situation, a living will often result in you being able to pass more of your assets along to your heirs. It is true that a living trust costs more to initially set up; however, the benefit of not being subject to probate often result in money savings. Another important point that should be made regarding living trusts is that they are far more difficult to contest. Hence, the chance that a creditor could swoop in after your demise and challenge — and win — the validity of the estate distribution is much lower with a living trust.
Here is a clear-cut advantage of a living trust over a will. If you have a living trust, your financial affairs are not made public after you pass away. The same cannot be said about a will, which becomes public record when you die. This protects your heirs from unnecessary scrutiny.
Obviously, everyone’s situation is different. Further, a living trust and a will both deal with very personal issues. If you have any questions pertaining to setting up a living trust or a related issue, please don’t hesitate to contact us.