Deciding to create a will or living trust isn’t an either/or scenario. They are different estate planning tools and, although rare, some clients’ estate plans include both. In most cases, a single consultation with an estate attorney can determine whether you’re best with one or both options to move forward making estate plans in an informed way.
Many people mistakenly believe that trusts are for the wealthy. This is not the case. Even singletons and couples without children benefit from wills, trusts, and other types of estate planning.
Will Or Living Trust
First, let’s review the differences between a will and a living trust.
Wills (Last Will & Testament)
Wills are what most people think of when they imagine making end-of-life plans. They are simple, legal documents outlining your wishes after you die. Wills cover estate planning essentials, such as who will get what when you die. This ranges from the total cash value of your liquidated assets (properties, houses, collectibles, owned cars or toys, etc.) and your possessions.
Your will can be as simple as “When I die, I want everything to go to my oldest sister…” to a very long and lengthy list of family, friends, and charities or organizations you want to give something to after you pass away. They can also be more in-depth, naming your chosen trustee/executor, including information about who becomes the guardian of your child(ren) (or pets) if you die while they are minors, forgiving personal debts, or stating repayment amounts for private debts you carry that aren’t on record, and so on.
Wills are revocable, meaning you can alter them at any point during your lifetime. After you die, your executor will pay any existing taxes and debts owed. Then, s/he’ll move forward with honoring the directions, bequeaths, and requests outlined in the will. Also, it’s worth noting that wills almost always have to move through some type of probate process after you die.
In short form:
- Wills are the most simple estate planning document.
- You can alter it at any time (assuming you are of sound mind).
- They are legally respected but still move through probate and can be contested (especially if they weren’t reviewed and filed with a licensed estate attorney).
- Other than any estate planning fees, there is no need to fund a will as it remains inactive until you die.
- Is more easily contested than a trust
(Living) Trusts
Trusts come in many forms, and an estate planning attorney can walk you through which type(s) of trusts would be best for your current and future goals, including guardianship of minor children or adult children/loved ones with disabilities. They also include key information about who can speak and act for you in case you are incapacitated (your chosen medical/healthcare proxy and a Power of Attorney). In most cases, we recommend using a living trust. As the name implies, living trusts exist in the present – while you’re still alive – and continue with instructions for after your death.
One of the most compelling reasons to create a trust, especially if you have any property or assets to speak of, is that they go through minimum to no probate depending on how they’re set up. This reason alone can make the more complex initiation and continued funding/maintenance of the trust worth your family’s while.
Any properties or assets covered in the trust must be funded through the trust. Typically, the owner of the trust (you) remains the trustee until they pass, after which their named successor trustee takes over the trust administration. Trusts, both living and other types, are also used to minimize lifetime trust and post-death distribution taxes and fees.
In short form, a trust:
- Is more expensive than a will because it’s managed throughout your lifetime
- Must remain funded
- Can avoid or greatly minimize any probate requirements
- Prevents your financial affairs from becoming part of the legal record after you die
- Rarely requires probate
- Is harder for anyone to challenge or contest
Signs a Trust is Your Best Option
If you’re debating between creating a will or a living trust, consultations with local, experienced estate attorneys are the best way to make an educated and informed decision. These consultations are no obligation, but at least you’ll get a feel for different attorneys and their input, which you can call upon later if you choose to move forward with estate planning.
In the meantime, here are signs a trust is a better option for you:
- Your net worth is $150,000+ and you have multiple assets.
- You’d like your heirs/beneficiaries to avoid probate.
- You have a blended family and/or there is a chance some family members may disagree with, resent, or context your decisions.
- You’re 65+ and/or facing health problems.
- There is a child or loved one with disabilities you want to support.
- You have privacy concerns or resistance to having your financial life made public.
- There are assets you want to protect from creditors.
- You and/or your heirs/beneficiaries can avoid taxes and fees.
- Your instructions upon death are very specific and less general than those typically included in a will.
Let Tseng Law Firm Support Your Decision-Making Process
Contact Tseng Law Firm and schedule a consultation. (510) 835-3090. Our experienced legal team can take a look at your complete profile – personal wishes, assets, financial record, etc. – and help you decide whether a will or living trust is the best option for you. We’ll also make any other recommendations to improve your estate planning process, optimizing the net worth for you and your heirs and beneficiaries.