Sometimes people ask estate planning attorneys questions about wills or living trusts that reflect common misunderstanding of what these two tools are designed to do.
When you and your estate planning lawyer create an estate plan, you will decide on some specific elements to include that will allow you to address each of your needs. Depending on your particular circumstances, the tools you decide to create might be very different than those someone else uses.
However, two of the most important estate planning tools today, a last will and testament and the revocable living trust, are usually included in every estate plan. Here’s what you need to know about these two essential tools.
Your will takes effect after you die.
A last will and testament is designed to give you the ability to express certain types of choices that you want to make after you die. Until you die, you retain the right to change your will and any of its terms.
Yet regardless of the choices you make in your will, it’s important to remember that these choices only apply after you die.
Your living trust takes effect when you create it.
A revocable living trust is something that takes effect immediately upon its creation. When you create a trust, you create a type of legal entity. This entity is capable of owning property in much the same way that a corporation can own property. As soon as you create the trust, you can then begin transferring the property you own as an individual into the trust name.
Further, you also get to determine how you want to distribute that property after you die. Since the property will be in the trust’s name at that point, it falls to the trustee to distribute trust property in accordance with your wishes.
Living trusts are great for allowing you to avoid the probate requirements that would apply to your property if, for example, you decided to transfer them through your last will and testament.
You need both a will and a living trust.
If you use both a will and a living trust to distribute inheritances, the inevitable question of why you need both arises. While people with a living trust usually use it as their primary inheritance vehicle, they still need to create a last will and testament.
The practical reality is that many people do not always get around to transferring all of their property into the trust’s name. Further, there are other choices that you can make through will that you cannot make through a living trust.