A living trust and a will are both estate planning options. They sound quite alike. That’s why people sometimes confuse them. In fact, these two serve completely different purposes. This article will help you understand the difference between a living trust and a will.
A major difference between the two is the following. A will only covers what happens to a person after their death. While a living trust covers more phases of a life:
- While a person is alive and well
- While they are alive but not well
- After they are no longer alive
What is a will?
Actually, a will is a document that allows a person to express their wishes regarding the medical procedures they might have to undergo. For example, if a person’s health is critical and they cannot voice their wishes, a will can help. An irreversible coma or a condition after a severe accident might be the cases when a person cannot explain their wishes.
Also, a will can indicate how a person’s property should be distributed at the time of their death. A will allows naming someone to manage any property earned by or left to your kids. With a will, you can appoint a guardian for your kids. And you can edit your will during your lifetime.
With a will, you cannot expect the management of your assets to be transferred to someone else if you are mentally or physically incapable. You will need a health care directive for this.
Some more facts about a will
Unlike in a living trust, in a will, you can leave instructions regarding your debts and taxes. For example, you can say how your debt should be paid. You can also use a will to forgive others’ debts owed to you.
To create a will, you need two witnesses who will not receive anything under the will. Note that until the moment you die, a will is just a piece of paper. However, a living trust comes into effect as soon as you sign it.
It is usually simpler and cheaper to set up a will than a living trust. Note that the property left by a will must go through probate. And a probate is usually a process that takes a long time and can be expensive. Upon probate, a will becomes a public record. Usually, probate lawyers control the actual distribution of your property. That’s why it can be both unpleasant and slow.
What is a living trust?
A living trust provides the chance of property management both during your lifetime and after your death. Court intervention is not required. If you are incapacitated due to an accident, a trustee can manage your property.
A living trust is different from a will in three major aspects:
- Your records remain private
- You avoid probate on your assets
- You cannot designate anyone as a guardian for your kids
Note* that you can, however, designate a guardian for your kids in a will that supplements your living trust.
In a living trust you cannot tell your successor trustee what to do with your debts and taxes. One more important point about the living trusts is that to leave property, you need to transfer it into the trust. In a will, there is no need to make a transfer of property.
So which one to choose?
Regardless whether you choose a living trust or a will, you should never leave any of these documents unattended. Note that living trusts usually require a few more steps to setup, for they are a bit more complex. However, you should acknowledge the importance of taking the necessary steps to make these documents work for you. It will depend on your property which document you should choose. Typically, a lawyer is the person to turn to for guidance and help. Just remember that making the right choice can save you money and heartache. Good luck!