Estate planning is a challenging task for most people. It can be intimidating, not just from the perspective of confronting the idea of your own death, but also from concern over making the right decisions now for the future. Because there are many tools available to protect your legacy, we commonly help answer questions for our estate planning clients about the differences between wills and revocable living trusts.
Contrasting Wills and Revocable Trusts
A will is a legal document that becomes effective upon a person’s death and distributes assets to beneficiaries after the probate court process ends. A revocable living trust, also referred to as an “inter vivos” trust, is a legal entity used to hold assets separate from the creator of the trust’s estate during their lifetime. In most cases, the creator of the trust, called the grantor, also acts as the trustee during their lifetime and remains in control over the assets. Once the grantor passes, the assets in the trust may pass directly to the beneficiaries outside of the probate court process, or be held in the trust and distributed in accordance with the grantor’s wishes. While both documents have their own advantages, trusts generally offer more protection and flexibility than wills.
Creating a Will or Trust – Time and Money
Creating a revocable trust is a more in-depth and complex process than creating a will. The initial setup will generally involve more time and will be costlier than a standard will. However, a trust may allow for the more efficient distribution of assets after a person passes because the contents of the trust avoid the court probate process. Administration of a will through the probate process can be difficult, time consuming, and expensive. Often the probate process is lengthy and may delay distribution of assets to the beneficiaries of an estate while the probate process is finalized.
Asset Distribution Differences
In some circumstances, a will may not serve to distribute property as precisely as the decedent may have intended. A will can only distribute property owned by the decedent at the time of death.
Unlike a will, a trust offers you more control and structure where the distribution of assets is concerned. Special provisions in a trust can delineate specifics about the preservation and distribution of the assets it holds, including restrictions on beneficiary distributions.
Trusts are generally applicable regardless of where you live. And because a revocable trust generally permits the Grantor the right to revise or revoke it at any time before their death or incompetence.
The Grantor can also name a successor trustee who will manage the trust’s assets in the event you become unable to do so. Despite the flexibility and protection a trust can provide, there are many things a trust cannot protect against, like creditors and healthcare costs. A trust does not reduce estate taxation upon a grantor’s death. And most importantly, creating a trust to secure your assets does not override the necessity of also creating a will that addresses assets not titled to the trust.
Though creating a standard estate plan that includes a will, powers of attorney, and health care directives is often adequate to ensure your assets are distributed as you desire, trusts are used effectively to meet unique goals of individuals who have estates of all sizes. Substantial wealth is not required to take advantage of the benefits a revocable trust can provide.
Our estate planning team will meet with you to learn about your circumstances, listen to your goals and will guide you to form an estate plan that that will work for you now and in the future. Request your confidential consultation today by calling 919-533-4115, or complete our online form to get started.
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