While you may have heard of both a will and a living trust, you may think of them separately and not subject to comparison. The truth is that both a will and a living trust can have an important place in an estate plan. In fact, both can act as a means of distributing a person’s assets upon their death. So, what are the difference between a living trust and a will? Why would you use one over the other in your estate plan? Let’s take a look at how these two estate planning tools differ to help answer these questions.
The Difference Between a Living Trust and a Will
A trust is an interesting and useful estate planning tool. There are a variety of trust types and each can serve a unique purpose. A living trust is created by a grantor during his or her lifetime. A trustee must be appointed to manage the trust for the benefit of the beneficiaries according to the governing terms of the trust. Often with living trusts, the grantor acts as trustee for his or her lifetime and then a successor trustee takes over when the grantor dies. Once established, the trust immediately takes effect, but, in order to be effective, must be properly funded. To fund a trust, assets must be transferred into the trust. This means that ownership of these assets must be turned over to the trust. Upon the death of the grantor, the corpus of the trust will be managed and distributed by the trustee according to the trust terms.
A will, on the other hand, is a legal document created by the testator during his or her lifetime that will not take effect until the testator dies. Each state has its own rules for how to create a valid trust and what formalities must be observed for a will to be properly executed. In a will, the testator can detail assets and state who is to receive said assets after the testator passes away.
One of the central differences between a will and a living trust, especially as it pertains to asset distribution upon a trustor or testator’s death is the fact that a will goes through probate and a living trust does not. The assets that are distributed via a will go through probate. Beneficiaries of a will have to wait for what can be a very lengthy court-supervised process to be completed before receiving an inheritance. Probate can also be quite costly with court costs and legal fees adding up along the way. Furthermore, probate proceedings become a matter of public records and, therefore, do not afford much privacy. For these reasons, people often seek to avoid the probate of their estate in whole or, at least, in part. Using a living trust is a good way to do so. Assets passed via a living trust avoid probate and distribution is overseen by the trustee.
Syracuse Estate Planning Attorneys
There are many estate planning tools and options of which many people are not aware. Talk to the knowledgeable estate planning team at CDH Law on how to create a comprehensive estate plan that takes your goals and best interests to heart. Contact us today.