Will

Living Trust Or Will

See which is more beneficial to you by comparing the differences of a living trust and will here.

You may be trying to decide whether to create a living trust or will to distribute your assets when you die. This decision can be a difficult decision to make because, while a living trust or will can accomplish the same thing, they do it in a different manner. The costs to implement them will also vary greatly. A simple will can be created or purchased at significantly less cost than a trust. Unfortunately, though, a will doesn’t own your assets so when you die the will has to be presented to a court of law (probate) and the public then has the right to challenge your will.

Remember the Howard Hughes fiasco several years ago when several people presented to the Nevada Probate Court various wills all claiming that they were the real will of Mr. Hughes? Even if there’s no question that the will you made out is valid, only a judge has the power to transfer the assets you owned during your life to the beneficiaries listed in your will.

Another big difference between a living trust and a will is the time it can take for them to be implemented. Sometimes, based on the size of your estate and the court’s ability to schedule the hearing, it could take 6 months or even a few years to finally get assets transferred. On the other hand, if you have a living trust, meaning it’s a trust created during your lifetime, then you can transfer ownership of assets to it so that when you die, the trust will continue to own the assets and only the person controlling the trust, called a trustee, will change. The trustee will be you during your lifetime, and a person you select after you pass away. Only that person can then transfer ownership of the assets to your beneficiaries at little to no cost. Furthermore, the transfer will only take place at the time you described in the trust that you want the beneficiary to receive the asset. This means that not only is there a difference between a living trust and a will as to how long it takes to actually be implemented, but with a living trust, you have more control over time, as well.

Another thing to consider when deciding between a living trust or will is the way legal fees are paid. While a living trust costs more when created, you pay now for those services and then your family won’t have to pay much, if anything, when you die. If you use a will instead of a living trust, you don’t have to pay as much now, but when the will goes through probate, there are attorney fees and court costs that will have to be paid by your family. These fees can actually even end up costing more in the long run for your family than your living trust would have cost. So, you decide if you want to pay now for legal services to create a trust, or you can wait and your estate will pay a whole lot more later for legal services if it’s a will.

If you still aren’t sure whether a living trust or will is better for you, consider the following:

If you own any real estate, any at all, then generally speaking a trust is the preferred option over a will. Also, if you have beneficiaries in mind who may not be very responsible from a financial aspect (and if you want to restrict their access to their inheritance), a trust will also probably work better for you than a will.

If you’re married and you and your spouse want to minimize any inheritance taxes that would have to be paid to Uncle Sam from your estate after the two of you die, a trust is what you need. Remember, your estate includes the face value of life insurance, the value of your Individual Retirement Accounts, or IRA’s, the value of your 401(k)’s, the net value of your home and other real estate, the value of your savings accounts, checking accounts, and stock accounts. In essence, everything you own (even the things that aren’t actually in your possession).

Some people may want to set up a living trust and a will. This is not required by law, but it’s the smart thing to do because if, for whatever reason, an asset you owned wasn’t transferred into your trust, what happens to it when you die? An accompanying will resolves that question by emphatically telling the court to transfer it to your trust and then the trust will dictate where it goes.

Whether to create a living trust or will is a question that should not be answered lightly. You should consider what is best for you and your family, as well as cost (both now and later) as well as whether you want to avoid probate. Once you have made the decision of whether to use a living trust or will, you can consult with an estate planning attorney to determine the cost and to get started with planning.