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Wills vs. Living Trusts

There is generally much discussion about the benefits of using a Living Trust based estate plan vs. a Will based estate plan. Rarely is information regarding the choice of Wills or trusts presented in a fair and objective manner. Proponents of Wills often suggest that there is no real benefit from using a living trust if you live in a state where the probate process is fairly simple.  Proponents of living trusts often overstate the benefits of a trust to the point that they sound like a scam. This article will give you information in plain English, so that you can make appropriate estate planning decisions, based on your particular situation and priorities. Tweet: Make appropriate estate planning decisions, based on your particular needs.

Which is better, a will or a trust?

Should You Create a Will or Living Trust?

The number one goal that almost every client expresses to me is that they want their estate plan to be simple!  The truth is that an estate plan can only be as simple as the circumstances of the maker’s life.  For example, for a widow of modest means (a checking/savings account and retirement income) who never remarried and has only one child… her estate plan is simple.  The level of complication rises with every additional factor of our life (family or financial), so that on the opposite end of the spectrum from our widow is a person in a second marriage or with a “blended family” who owns a family business in which only some family members participate… This estate plan inevitably gets more complicated.

A Will certainly fits the simplicity bill.  When making a Will, the most important issue to focus on is that you have executed the document correctly under your state’s laws.  The contents are fairly straightforward and less detailed than that of a living trust. Living trusts, on the other hand, are more complicated documents and can include specific conditions on how and when your assets are distributed to each beneficiary.

Be aware that a Will does not go in to affect until after you die and is used only to distribute your assets to beneficiaries, after the probate process is complete. In contrast, a living trust goes in to affect immediately upon creation; holding your assets for your use until death and then allowing for quick and easy distribution to your beneficiaries and avoiding the probate process.

As a planning vehicle, Wills are usually easier and cheaper up front, but require more effort and expense once the maker has passed on.  The burden falls on the heirs to find, inventory and split the decedent’s assets with the court’s supervision.  On the other hand, living trusts are more work and more expense up front, but administration of a trust after the death of a Grantor is much more simple than probating a Will, leaving less burden on a surviving spouse, children or other heirs later.

In order to decide whether a Will or Living Trust is best for you, consider the complexity of your family situation, the number of assets you have and how you want them distributed upon your death. If your situation is pretty simple, a will should suffice. If you want more control over the disbursement of your assets, you should probably go with a living trust. It is always a good idea to talk with a professional to ensure you’ve considered all factors prior to making a final decision.

If you’d like to learn more about Wills or Trusts, we offer additional articles and videos on those topics as well as a number of other financial subjects.

This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.