When it comes to our hard-earned assets, we want to make sure we protect them and that they end up in the hands of the right people after we pass away. Whether you plan to leave your assets to family, friends, or charity, there are a number of ways they can be transferred to the intended beneficiaries after you die. Each method of transfer is unique in its own way and it can be important to understand the differences to help ensure you select the right mechanism to suit your own circumstances. Two of the main tools for transferring assets upon a person’s death include a living trust and a will. Let’s take a closer look at these estate planning tools.
Differences Between a Living Trust and a Will
A last will and testament, or simply a “will,” is a legal document created by a testator which must observe certain state law prescribed formalities in its execution in order to be found valid and survive any potential will contests should they arise further down the road. While a will is executed during the testator’s life, it actually does not take effect until the testator dies. It is probably one of the best know estate planning documents available and is primarily seen as a way to outline assets and direct where they should go after the testator dies, although it can accomplish other things such as naming a guardian for any surviving minor children of the testator.
A living trust may be a lesser-known estate planning tool than a will, but it remains an important and beneficial one, nonetheless. To establish a living trust, the trust grantor or trustor creates the will and appoints a trustee to manage the trust for the benefit of the designated trust beneficiaries. In the case of a living trust, the trustor often appoints themselves as trustee and names a successor trustee to take over upon their death. The trust can be funded with a wide variety of asset types, but, in order to be effectively used to fund a trust, ownership interests in the assets must be turned over to the trust. So, in effect, it is the trust that owns the asset although the trustor retains significant control over the asset should they step into the role of trustee of the trust.
Unlike a will, a living trust becomes effective upon its execution. There is no delay in effectiveness until the trustor passes away. Furthermore, a living trust avoids probate whereas a will goes through the probate process. This difference makes way to one of the major benefits of establishing a living trust. Probate avoidance is often sought after in the estate planning world as probate can be lengthy as well as frustrating. Beneficiaries must wait until the end of the process before receiving their inheritances. Probate can also be expensive when you consider the total of court costs and legal fees involved.
Estate Planning Attorneys
Do you want to learn more about your estate planning options? The team at Jones, Gregg, Creehan & Gerace can help you evaluate all of your options and work collaboratively with you to develop a strong estate plan you can count on. Contact us today.