Choosing Between a Living Trust and a Will
Planning for one’s death or incapacity is something many people put off. After all, who wants to think about these unpleasant occurrences? This often proves to be a critical mistake. Without a plan in place, your family and loved ones are subjected to chaos and distress at a time when they are most vulnerable. So first, congratulations for beginning the process now and not putting it off until it’s too late.
Now that you have begun, however, how do you choose the best plan for your family? While doing your research on the basics of estate planning, it is likely that you’ve come across articles discussing planning using a will vs. planning with a living trust. Of course, everyone needs to have a will, but should the planning be done through the will or through a living trust, and what is the difference?
Don’t feel ashamed for being unaware as many people don’t fully understand these differences until they sit down with a knowledgeable estate planning lawyer. For starters, both types of plans effectively provide for the efficient distribution of your assets after you die, but that’s only part of a comprehensive estate plan. In the sections that follow, we discuss some of the factors to consider when deciding whether a will plan or living trust is best for you.
What is a Will?
A will is a legal document that dictates where a person would like their assets to go upon their passing. This document can help ensure that the probate process and distribution of wealth is uncontested and straightforward. Regardless of whether the identified entity is a minor or adult, family friend or a spouse, a will provides that the person you want will get custody of the specified assets. If you prefer not to leave assets to a particular person, you may identify charitable beneficiaries.
A will can also leave assets to your beneficiaries in trust. This type of trust is called a testamentary trust rather than a living trust. The differences between these two types of trusts are discussed below.
You should always have either a will plan or living trust. If you don’t, state law takes control, and your assets may be disbursed to some distant relative who you may not know or like.
Some other common uses for a will include:
- Naming an executor;
- Deciding how to pay debts; and
- Naming a guardian for your minor children and property.
What is a Living Trust?
A living trust is a legal document that designates a trustee to manage your assets during your lifetime and at your death. Typically, you would transfer your assets into the trust and serve as the trustee during your lifetime. Your social security number is used as the tax id number, so there is no need to file a separate tax return. In addition, you, as trustee, have complete control over the assets and you can alter, amend or revoke the trust at any time.
After your death, the living trust is controlled by the death trustee who will manage your property and ensure that your possessions are distributed to your beneficiaries under the specific terms of the trust. For example, rather than distribute the property outright to your children, you may wish to keep them in trust. Keeping the assets in a trust can protect them from creditor claims, a frivolous expenditure or a bad marriage.
Wills vs. Living Trusts
Both living trust plans and will plans can protect assets for your loved ones, but there are two major differences. First, any will plan must go through the court process known as probate. Probate is public and allows anyone to view your assets at any time. It also generally takes at least nine months before assets can be distributed to your loved ones. Finally, there are filing fees to the court, and you will likely need to hire an attorney to file the necessary documents.
The second major difference is that a will plan only takes effect at death, whereas a living trust plan governs both lifetime and after death planning. Accordingly, a living trust can plan for what happens to a person’s estate if they are disabled, whereas a will cannot. Instead, a will plan must rely on a power of attorney to control assets during a disability.
The power of attorney, however, is not nearly as flexible in providing for disability planning as the living trust. Rather than requiring a doctor’s statement — something doctors are often uncomfortable providing — a living trust allows you to choose a person or group of people you trust the most to make this very important decision.
All of this may seem overwhelming, but with the help of a knowledgeable estate planning attorney, you can receive the guidance you need to make an informed decision.
Legal Help from Experienced DC Estate Planning Lawyers
An experienced estate planning lawyer serving the DC and Maryland area at The Law Offices of Clifford M. Cohen can sit down with you and serve as your counsel throughout the estate planning process. Mr. Cohen has over 35 years of experience helping clients achieve peace of mind and protect their loved ones. Allow us to do the same for you. Contact us today at (202) 845-7036 for a free case evaluation.