Estate Planning Essentials: Wills vs. Living Trusts

Planning for the future is one of the most thoughtful things you can do for your family. By clearly outlining your wishes for your assets, you can spare your loved ones from confusion and stress during an already difficult time.

Two popular tools for estate planning are wills and living trusts. But what sets them apart, and which one is right for you? Let's explore these options to help you make an informed decision.

Understanding Wills and Living Trusts

A will, also known as a last will and testament, is a document that specifies how you want your belongings distributed after you're gone. This includes physical items like your home and car, as well as financial assets such as bank accounts and investments. Wills also allow you to name guardians for your minor children.

On the other hand, a living trust is a legal arrangement where you pick someone (called a trustee) to manage your assets for your heirs. You transfer ownership of your assets to the trust, and the trustee oversees them. Many people choose to be their own trustee, which lets them keep control of their property while they're alive. In this case, it's important to name a backup trustee to take over if you can't manage the trust anymore.

Key Differences Between Wills and Living Trusts

While both wills and living trusts help you plan for the future, they have some important differences:

1. When they take effect: A will only comes into play after you pass away, but a living trust starts working as soon as you set it up and put assets into it.
2. Probate process: Assets in a will must go through probate, which is a court-supervised process to distribute your estate. Living trusts skip this step, potentially getting assets to your heirs faster.
3. Privacy concerns: Wills become public record during probate, while living trusts stay private. This can be appealing if you want to keep your family's financial matters confidential.
4. Upkeep: Living trusts need regular updates to include new assets you acquire. Wills should be reviewed every few years or after major life changes like marriage or having a child.

Who Might Benefit from a Living Trust?

A living trust could be a good fit if you:

• Want to avoid probate, especially for a large or complex estate
• Own property in multiple states
• Value privacy for your estate matters
• Want to plan for possible incapacity
• Have minor children or beneficiaries with special needs
• Wish to control how and when your assets are distributed
• Are part of a blended family

Choosing Between a Will and a Trust

Is a living trust always better than a will? Not necessarily. Your choice depends on your unique situation and goals. For many people with straightforward estates and simple wishes, a will is often sufficient.

However, if you have a more complex family situation, own property across state lines, or need to provide for dependents with special needs, a living trust might be more beneficial.

Remember, estate planning isn't one-size-fits-all. Consider talking to a financial advisor or estate planning attorney to determine the best approach for your specific needs. They can help you create a plan that gives you peace of mind and ensures your wishes are carried out exactly as you intend.

Disclaimer: Estate planning may implicate both state and federal laws, and estate planning needs will differ based on personal circumstance and applicable law. We are not a law firm and our services are not substitutes for an attorney’s advice. The information here is provided for educational purposes only and is not intended to provide, and should not be construed as providing legal or tax advice. This information is general in nature and is not intended to serve as the primary or sole basis for investment or tax-planning decisions.