Will or Living Trust: Which Estate Planning Document is Right for You?
A will is often the cornerstone of any estate plan. A will is a document spelling out exactly which of your assets should go to which heirs. It’s an effective way for you to express your estate planning goals and wishes to your loved ones and to your local probate court.
Wills are often straightforward documents drafted by an attorney and signed in front of a witness. However, they are fairly simple to create and are relatively affordable.
A will isn’t the only estate planning document you might consider, though. Many people opt for another planning document known as a living trust. A living trust is also a planning tool that guides your heirs in the distribution of your assets. However, a living trust does a few things that a will does not.
Unsure of which document is right for you? Check out the comparison below.
A will is a written document used to distribute assets after your passing. In the will, you can either leave your entire estate to a certain individual, or you can specify for certain assets to go to certain individuals. Either way, the court will look to your will for guidance in how your assets should be distributed.
In your will, you also name an executor. The executor is the person who oversees the settlement of your estate. That process can include the payment of all debts, sale of certain assets, court filings, and, finally, the distribution of your assets. You’ll want to name a reliable and trustworthy person to be your executor.
The benefit of using a will is it provides your heirs and the court with clear instruction about your wishes. It’s also a simple and affordable estate planning strategy. However, you can’t use a will to control how your heirs use your assets. Also, with a will, your estate will go through probate, which is a settlement process that could delay the distribution of your assets for weeks or even months.
A living trust is an alternative estate planning tool that does some of the same things a will does but also provides more control of your assets. With a living trust, you name someone as the trustee. You can name yourself trustee, but you will also have to name a successor trustee to take over after you pass away.
Like a will, the trust spells out which assets should be distributed to which individuals. Keep in mind, the trust can only govern assets are owned by the trust. If you have property or investment accounts not owned by the trust, you can’t use the trust to guide their distribution.
There are two key distinctions between a living trust and a will. First, a living trust gives you the ability to control assets from beyond the grave. You can specify when assets are distributed and how they are managed. If you have an heir who is a spendthrift or who is unable to manage money, you can set up management processes on their behalf through your trust.
The second distinction is assets in the trust will bypass probate. A trust is a document that has a beneficiary designation, and beneficiary-driven vehicles don’t go through the probate process. That means your heirs could receive their assets faster than if you were to only use a will.
The drawback to a living trust is its complexity. You may need significant help from an attorney to create the document. It could be a costly process, so you’ll have to consider whether the benefits are worth the expense.
For more information, meet with your financial professional and possibly even an estate planning attorney. They can help you analyze your situation and determine which type of document is right for you.
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