Are you worried about the future of your assets? Do you want to provide a secure future for family members? You might wonder if you can use both a will and a living trust to help with that. Yes, it is entirely possible to have both a will and a living trust.
Both wills and living trusts are documents people use to secure their assets during estate planning. These documents create a well-rounded estate plan and you should consult with a lawyer to set up a trust and will. Each type of document has its own purpose, and to determine if you need one or both, you should understand the difference between a living trust and a will.
What Is the Difference between a Living Trust and a Will?
There are some similarities between a will and a living trust as they both deal with estate planning. With a will and a revocable living trust, you can make alterations at any point before you pass away, as long as you are mentally capable. However, they both operate differently and offer unique benefits.
Below are the key differences between a living trust and a will.
A will is a legal document stating how you want your assets and property to be distributed upon passing. It allows you to designate guardians for underage children and wishes for funeral arrangements. On the other hand, a living trust is a legal entity that manages and holds your assets while you are alive.
A will only becomes effective after your death, but it is relatively easier and less costly to establish. A living trust is active during your lifetime and even after you pass away. You also have the option to act as the trustee or to appoint someone else to manage your assets.
All assets distributed by a will are subject to a probate process. A probate is a legal process that validates a will to ensure assets go to their rightful heir. However, this process is usually time-consuming and costly. If your will goes through the probate process, it becomes a public record.
This means the details of your estate will be made publicly available. If you value your privacy, this is something you want to avoid. Living trusts allow you to avoid probate. By avoiding probate, asset distribution becomes much quicker and more confidential.
However, if at any time you are incapacitated, a will doesn't have any mechanisms to handle your assets. This can be a huge problem in emergencies. This is not the case for a living trust. By including provisions for incapacity, you can maintain continuity in handling your affairs and have peace of mind knowing that everything is taken care of.
Do I Need Both a Will and a Living Trust?
There are several reasons why people need both a will and a living trust for a more comprehensive estate planning strategy. However, it all boils down to your unique financial situation and your needs.
If you want your beneficiaries to receive your assets swiftly and without complications, then a living trust is more effective. Family members can challenge a will during probate, delaying the process and complicating matters.
Contingencies are crucial for an estate plan. When creating a living trust, it's possible to exclude certain assets inadvertently. To avoid any unintended consequences, having a will as a backup ensures that all your assets are distributed according to your wishes.
Make sure to consider guardianship decisions when creating your estate plan. Unlike a living trust, a will explicitly allows you to name guardians for your children if they are minors. This ensures their well-being and clarifies their care in the event of your passing.
Personal items and heirlooms can be addressed in a will through specific instructions. On the other hand, a living trust primarily handles significant assets such as real estate, bank accounts, and investments.
It is beneficial to have both documents in complex situations involving estates to facilitate intricate planning. This includes considerations such as blended families, property ownership in multiple states, and management of a family business.
Start Planning for Your Loved Ones’ Future
While a will and a living trust have overlapping purposes, they also have unique features that can complement each other. Using both allows for a more robust and flexible approach to estate planning.
With our estate planning experts, we take a holistic approach to our financial services. We have access to estate planning attorneys and tax professionals so we can ensure your assets are distributed to your wishes and reduce the tax burden on your loved ones.
Stewart Willis is the founder and president of Asset Preservation Wealth & Tax, a financial planning firm in Phoenix, Arizona. Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.
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