Making responsible decisions is an essential part of life. Choosing what to do with your money after you pass away can be a tough decision – like other investments and financial changes, making a wise choice requires a thorough investigation of all options. Building an estate plan allows you to dictate what will happen to your money in the future; and like most financial preparations, it’s generally a good idea to start early. You may have heard of a last will, but have you heard of the alternatives? If you’d like to ensure that your heirs can get the most out of your assets, you may want to consider a living trust.
What is a Last Will? What about a Living Trust?
Let’s start with the more straightforward option – a last will. Also referred to as a “last will and testament,” this legal document directs your county court to fulfill your final wishes. Most people will specify a beneficiary – or several – who will inherit property and specific items. In a will, you can name an executor (who will be designated to handle your remaining financial obligations), decide how to pay your remaining debts and taxes, name a guardian for children and their property, provide the means to care for pets, and otherwise settle these matters without a great hassle. However, during the probate process – in which the court will process your will, take inventory of your property, and handle other matters – your financial records will become part of the public record and the court’s fees will be paid by using funds from your estate.
A living trust allows you to exert greater control over your property. During your lifetime, this legal document will enable you to direct your assets into a trust for your benefit and then transfer these funds to designated beneficiaries upon death. Thankfully, the publicity, inconvenience, and expense of a court-processed will won’t be necessary; these matters are resolved privately and there is no need to get involved with the probate process. If an accident befalls you and you become incapacitated, a living trust can include provisions to plan for such an event. A living trust also allows your executor to handle regular matters expected in a will, but with much greater detail. For example, children with special needs can be accommodated for with greater ease using a living trust.
Is a Living Trust Right for You?
Although a living trust requires a bit more attention and upfront expense, it can provide plenty of benefits for those looking to make the most of their money, and exert the greatest control over their estate. As described by LegalZoom, a living trust enables you to take greater control over your assets. Once your living trust is properly set up, you can take advantage of numerous special perks such as avoiding the aforementioned publicity of the probate process. Without going through this step, your heirs may receive your assets much faster – in weeks, rather than months or years. A living trust also grants you the freedom to create a “pour-over will” that can allow you to distribute any assets or leftover retirement funds that you accrue after the creation of the trust itself (take note that this will must go through probate).
Most importantly, a living trust may actually save you money. Although it costs more to draft this document initially, it may save money in the long run. If someone attempts to contest the distribution of your assets in court, a living trust can generally hold up better against a contest. That said, you should also be aware of the potential downsides of a living trust. Some states have a simplified, expedited version of the probate process for estates that fall under a particular dollar threshold – if your estate qualifies for one of these informal probate procedures, you may save more money with a straightforward will. Furthermore, if you don’t intend to actively manage your estate, then a living trust might not be worth the effort and expense required. At the end of the day, make sure to cover all of your options before making this significant financial decision.
We’ve covered the essential differences between living trusts and wills, but there are still several nuances to consider that might sway a decision. If you’re considering either of these financial plans, please consult with a financial advisor and/or legal advisor.