If you’re confused by the difference between living trust vs. will, don’t worry – you’re in good company. Many people confuse these terms. End the confusion and find out the key similarities and differences between them.
Both a living trust and a will are used to instruct your heirs on who gets your assets, when they get it, and how it will be given to them. For most people with an average-sized estate, a will is more than sufficient for their needs.
However, if your estate is much larger than average, it’s worth looking into the potential benefits of setting up a living trust, despite the fact that this will be more costly and complicated to set up.
Living trusts (LTs) are not subject to probate, whereas a will is. If you have property outside of your home state, your estate will have to cover the extra cost of that property undergoing the probate procedure in that other state.
Unlike a will, LTs do not have automatic supervision from the court in the event of a dispute, and they do not become public record after you die. If you anticipate that some of your beneficiaries will challenge the provisions of your LT, or that there will be creditor disputes, ensure that you have a plan for dealing with this.
With a will, you’ll need to appoint a power of attorney to manage your assets and oversee their distribution according to your instructions. With an LT, you can manage the assets in the trust while you are still alive and able, and appoint a successor to take your place when managing it yourself is no longer possible.
Costs of a living trust vs. will
Wills are less costly than LTs to prepare, however the probate fees can be very high. LTs are more costly to set up, manage, and fund, but are exempt from probate costs after you pass away. You’ll have to compare the anticipated costs of each option to see what will be more cost effective in your unique situation. Additionally, if over the long term an LT is more cost effective, but you can’t afford to set one up because cash flow is tight, you may be better off using a will to save on costs now.
What happens if you die without a living trust or will
If you pass away before you have a chance to prepare instructions for the handling of your assets (whether via an LT or will), state law will determine how your assets are distributed. While many times this works out fine (for example, if state law dictates that your loving spouse should get all of your property), other times it may not (for example, if your only surviving heir is an adult child with a severe gambling problem who will gamble away all of your assets upon receiving them).
Familiarizing yourself with differences between living trust vs. will is important
Don’t leave the handling of your assets to chance. Learn about the differences between LTs and wills, and choose the option that best fits your needs.