It’s pretty common to get the terms “will” and “living trust” mixed up. However, they’re very different and it’s important to know those differences so you can choose the estate planning components that best suits your needs. Each is a useful estate planning device that serves its own purpose but can also work together to create a complete estate plan.
When they go into effect
A will goes into effect after an individual passes away. However, a living trust takes effect as soon as it is created. That’s one major difference between a will and a living trust. However, both can be edited or changed up until the time of death as long as the individual remains mentally competent.
A will is a legal document that directs who receives an individual’s property following their death. It also appoints a legal representative to carry out these wishes. On the contrary, a trust can be used to start disseminating property before death, at death or following death. A trust is a legal arrangement where a “trustee” has legal title to property for another person -- more commonly known as a beneficiary. There are usually two types of beneficiaries listed in a trust. One beneficiary receives income from the trust during their lives while the other receives what is left once the first set of beneficiaries passes away.
Property Covered
Another difference between a will and a living trust is property matters. A will disposes of, or devises, any property that is only in your name. A will does not necessarily devise jointly-held property, and does not devise property in a trust. A will also cannot devose any assets that pass directly to a beneficiary by contract or by operation of law, such as life insurance policies or financial accounts for which there are named beneficiaries (although such assets may still be subject to claims of the decedent’s creditors in certain circumstances).
A living trust only covers property that has been put in the name of the trust. This means that the trust can govern and distribute any property it has been funded with including life insurance policies -- as long as the trust owns the policy.
Probate
It’s also important to note that a will passes through probate and a trust does not. This means that the probate court oversees the administration of the will and its validity to ensure the property gets distributed as the deceased wishes. Wills also become a matter of public record when they are submitted to the court system for probate.
A trust passes outside of probate so a court does not oversee the process. In the end, this may save time and money. Living trusts also can hold property for the benefit of certain beneficiaries like minor children who legally cannot own property until they reach a specific age.
Contact Sport Law
A will and living trust each come with their own advantages and disadvantages. Ultimately, choosing the right estate plan relies heavily on your personal situation and desires. The best way to determine which one is right for you is by speaking with the experienced team at Sport Law. We can help provide a guide of how best to use a will, living trust, or both in your estate plan.
Attorney Jeffrey Sport makes the estate and trust planning process efficient, understandable and manageable. Everyone needs a set of "rainy day docs." These include, at a minimum, a will, a durable power of attorney and a living will/healthcare directive. It is never too late to put these critical documents in place—until it is. Contact our office today to begin consultation on your rainy day docs and achieve peace of mind regarding your end-of-life arrangements.