will vs trust

Andrew Dickens of Dickens Law Group explains the difference between a living trust vs a will for long term asset management.

You have worked hard for your money and made every attempt to be a conscientious saver.  So it’s only natural that you want some control over what happens to your assets after you die.  Even if you are a person of modest means, you have an estate, and several strategies to choose from to ensure your assets are distributed according to your wishes and in a timely fashion: your “estate plan”.  The right strategy depends on your individual circumstances.  For some, a living trust can be a useful and practical tool.  For others, it may be a waste of time and money.  What is a living trust anyway?  And how does it differ from a will?

What is a Will?

A will is a written document, signed and witnessed, that indicates how your property will be distributed at the time of your death.  It is revocable and subject to amendment at any time during your lifetime.  It also allows you to appoint a guardian for your minor children.  For more detail about wills, read the article: Top Ten Reasons to Have a Will.

What is a Living Trust?

A living trust provides lifetime and after-death property management.  If a living trust is properly written and funded, you can:
• Avoid probate on your assets
• Plan for the possibility of your own incapacity
• Control what happens to your property after you are gone
• Use it for any size estate
• Prevent your financial affairs from becoming a matter of public record

If you are serving as your own trustee, the trust instrument will provide for a successor upon your death or incapacity.  Court intervention is not required.  As a result, the expense, publicity, and inconvenience of court-supervised distribution of your estate can be avoided.
While a trust can be appealing, there are drawbacks.  A living trust is more expensive to set up than a typical will because it must be actively managed after it is created.  Most importantly, however, a living trust is useless unless it is funded.  A living trust can only control those assets that have been placed into it.  If your assets have not been transferred or if you die without funding the trust, the trust will not achieve its full benefit.

Will vs. Living Trust Considerations

There are many positive reasons to establish a trust, but do not overlook the fact that it will involve more upfront effort and expense.  To determine if you should make the extra effort and investment of a trust, answer these questions:
1)  Is informal probate an available option?
Most states have an expedited or simplified form of probate for estates under a certain dollar threshold (the dollar value varies by state).  If your estate could pass under an expedited form of probate, or if you live in a state where probate is not a complex or burdensome process, a will could be appropriate.
2)  Do you have minor children?
A trust allows you to establish provisions specifying when a child will be entitled to any assets held in a trust.
3)  Do you have children, grandchildren, or other dependents with special needs?
In those instances, the access or control those heirs have over their inherited property may need to be limited.  With a standard will, your property can be passed on to those heirs but a will alone does not allow you to exercise much control over their use of the property.  A trust is more flexible and allows for more control.
4)  Will your estate be subject to estate taxes?
If the value of your estate exceeds the current estate tax threshold, you may wish to consider setting up a trust with tax planning provisions.  The estate tax threshold frequently changes, so be sure to check with an attorney or with the IRS to determine whether or not estate tax is a concern for you.
5)  Will you actively manage your estate plan?
A trust allows you actively manage you estate plan and make sure that your wishes are being caried out.  It has more flexibility than a will, and properly written, can anticipate many life changes that will affect how you want your estate managed.
So,what is best for you?  It depends.  In some respects, a will and a living trust accomplish similar objectives.  A trust, however, can allow for more active management, flexibility, and can accomplish some objectives that a will cannot.  Of course, those advantages don’t come without a price.  When choosing, remember that one size does not fit all.  What is right for one person may not be right for everyone.  Your estate plan should be prepared in a way that best meets the needs of you and your family.  This article does not address all the intricacies associated with wills and living trusts.  Consulting an attorney can help you make the right decision.
-Andrew Dickens
Attorney at Law, Dickens Law Group
Find out more about the estate planning services provided by Dickens Law Group.
Will vs Trust on the Dickens Law Group web site.