Will vs Living Trust: What’s Best for Your Estate Plan?
If you’re developing an estate plan, then you know there are a lot of important decisions you will need to make regarding your assets. One important decision that many individuals think about is whether their estate needs a will vs a living trust.
Both a will and trust have various benefits that can make your estate more secure. But, there are some distinct differences that may make one or the other better for your needs.
To help you decide which one is best for your needs, we’re going to explain the difference between the two and how a will and living trust will function within your estate plan.
Estate Planning: Will vs Living Trust
Estate planning is essential when it comes to protecting your assets even after you’re gone. Unfortunately, many people fail to prioritize a plan for their estate because it isn’t high on their priority list.
But an estate plan will ensure that your affairs can be settled and reduce the costs that may be placed on your loved ones. A will and a living trust are great additions to your estate plan, but many people don’t understand the difference between the two.
Understanding a Will
A will is a legal document that organizes how your assets are distributed after you pass away. A will can also appoint guardians for individuals with minor children. A will is an important aspect of your state plan as it essentially communicates exactly what you want to avoid any confusion and reduce stress. It’s important to note that you can make your will on your own. But using an attorney may be a better option as they can ensure everything is accurate and update your will as needed.
When individuals don’t have a will in place, this means that the state that they live in will be responsible for deciding how their assets get distributed to beneficiaries according to state laws. When the state distributes assets, this is called a dying intestate. Unfortunately, allowing the state to take control of your assets is not the best solution as the settlement process can often be lengthy and may not produce the best results for beneficiaries.
What’s included in a will?
Many people who are estate planning create a will because it outlines specific requests and ultimately leaves directions about how assets are to be handled. The contents of a will may include:
- A designated executor who will carry out the wishes of the will
- Beneficiaries
- Instructions that outline how the beneficiaries will receive the assets
- Guardians if there are any minor children involved
Understanding a Living Trust
A living trust is quite similar to a will. A living trust is a legal document that enables you to distribute your belongings to people and organizations after you pass away. Ultimately, a living trust “owns” all of the possessions that you choose to put into the trust while enabling you to maintain control.
Once you pass, a successor trustee will distribute the assets according to what the living trust outlines. Since a living trust can be revocable, individuals are able to still handle their assets in the same way they did prior, which is why many people like to have a living trust as part of their estate plan.
A living trust gives you complete control, which means you can terminate the trust at any time, change beneficiaries at any time, and change the successor trustee.
Another benefit of a living trust is that it enables you to avoid probate. Instead, your assets can be distributed immediately upon death to the rightful beneficiaries.
What assets should go into a living trust?
There are a variety of assets that can go into a living trust. Some assets you may want to include are:
- Bank accounts
- Real Estate
- Corporate stocks
- Bonds
- Life Insurance
Will VS Living Trust: Which is Better?
A will and a living trust are both great choices when it comes to delegating your assets. But deciding which one you need for your estate plan is a personal decision that depends on a variety of different factors.
With that said, a will has instructions to delegate who gets your assets and other belongings after you die. A will does not go into effect until you pass away and ensures your assets don’t get tied up in the court system.
On the other hand, a trust is considered a legal entity to which you transfer ownership of your assets while you’re alive. You have the ability to control what assets go into the trust and can remove assets if necessary.
A trust ensures that any assets included in the trust will be handled accordingly. Implementing a will enables any other assets outside of the trust to be addressed and can complete additional tasks such as appointing guardianship if you have minor children.
If you’re estate planning, a will or living trust is a great addition to help secure your assets. It may also be beneficial to have both a will and a living trust since they work cohesively together.
