I frequently receive phone calls from potential clients asking about a will or a trust but are not really sure which they need. While it is always wise to contact experts like us, it is also important to understand the basics. Here are some quick and simple tips:
What a Revocable Living Trust Can Do – That a Will Cannot
Avoid conservatorship and guardianship. By using an RLT, you are able to name a spouse, partner, child, or other person that you trust to manage your property and money that has been properly transferred to the trust, in the event you are unable to manage her own affairs. A will is a document that provides instructions after you die and is useless in avoiding conservatorship and or guardianship matters during your lifetime.
Property and accounts in an RLP do not go through probate. They are delivered to the beneficiary by the trustee. Property and accounts that pass through a will are absolutely going to go through probate. The probate process, the process of wrapping up a person’s affairs after paying any outstanding debts, is public, can be costly and time-consuming, and can take years to resolve.
Maintain privacy after death.
Wills are filed with the court, making them public documents. A trust is a private contract. This means that your nosy neighbors, predators (I have a bridge to sell you), and the unscrupulous will have access to who is inheriting your items if you only have a will. A trust allows you to maintain your privacy and the privacy of your loved ones.
Protect you from court challenges.
It is very hard (although not impossible) to challenge a trust because the provisions are private, unlike a will which is a public document.
What a Will Can Do – That a Revocable Living Trust Cannot
Name guardians for minor child. A living trust cannot be used to name guardians for minor children. Depending on state law there may be additional writings that can be naming a guardian however the RLT cannot.
Specify an executor or personal representative.
When you name an executor or personal representative in your will, that person is responsible for wrapping up your affairs after you die. This means working with the probate court, gathering and protecting your accounts and property that are not owned by the trust, paying your final debts and distributing what is left to your beneficiaries. If, however, there are no accounts or property in your individual name (because they have been properly transferred into a fully funded revocable trust), this feature is not especially useful.
What Both a Will & Trust Can Do:
Allow revisions to your document. Revocable living trusts and wills can be revised at your discretion and whenever your intentions change so long as you have the mental capacity to understand the changes you are making.
WARNING: There is such as a thing as irrevocable trusts, which cannot be changed without legal action. This is outside the scope of this discussion.
Revocable living trust and wills can allow you to choose who you want as your beneficiaries to receive your property.
A will can list your accounts and property and state your intentions of how it will be distributed. However, only accounts and property in your name will be distributed under a will. Accounts and properties with beneficiaries, transfer on death provisions, pay on death provisions, and joint tenancies will trump the provisions of the will.
In this regard a trust acts in a similar fashion. With a trust, you must however, take the extra step and “fund” or transfer the property into the trust – commonly referred to as “funding the trust.” This is accomplished by changing the name or title of your accounts and property from your name individually to the name of the trust. Only accounts and property in the name of your trust will be handled or distributed according to the provisions of the trust.
Provide asset protection.
Trusts, are designed to include protective subtrusts so that your beneficiaries can receive some enjoyment and benefit from the accounts and property in the trust while at the same time keeping the accounts and property from being seized by your beneficiaries creditors. Creditors can include divorcing spouses, personal injury litigants, creditors of failed businesses and bankruptcy trustees. A will may be able to provide some protection in certain circumstances.
Some of the differences between a revocable living trust and he will can be subtle while others are not. Together, we will take a look at your goals as well as your financial and family situation to design an estate plan personalized to your needs. Call us today to schedule your in-person or virtual consultation and let’s get started.