Although your initial estate planning document will probably be a Last Will and Testament, there may come a time when you consider adding to that limited plan or even using another primary method for the distribution of your estate assets. Specifically, many people decide that a living will is a better option for distributing assets than a Will. The question then becomes, Last Will vs. Living Trust? Understanding more about each one may help you decide which one is right for your estate plan.
Last Will and Testament Basics
By far the most well-known of all estate planning tools, a Last Will and Testament is a legal document that communicates a person’s final wishes pertaining to possessions and dependents. Your Will allows you to make both specific and general gifts. For example, you might make specific gifts of your art collection along with stock in Apple to a designated beneficiary. You could also gift a percentage of your estate to your son. For example, you could gift half of your entire estate to your daughter. Your Will is also where you will appoint someone to be the Executor of your estate. Your Executor plays a vital role in the probate of your estate after your death. Finally, a Will provides you with the only official opportunity you will have to nominate a Guardian for your minor children in the event one is ever needed after you are gone.
Living Trust Basics
A trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor (also referred to as a Maker or Grantor), who transfers property to a Trustee. The Trustee holds that property for the trust’s beneficiaries. All trusts are first divided into one of two categories – testamentary or inter vivos – the latter of which is more commonly referred to as a living trust. A testamentary trust is a trust that arises upon the death of the Settlor and which is typically activated by a provision in the Settlor’s Will. A living trust is a trust that takes effect as soon as all the legalities of creation are in place.
A trust agreement is also a legal document that serves to establish a trust. Assets held in the trust are distributed by the Trustee according to the terms of the trust. When used to distribute estate assets after the death of a Settlor, the trust terms will tell the Trustee when to distribute assets and which assets to distribute to which beneficiaries.
Last Will vs. Living Trust – How Do I Decide Which Is Right for Me?
Because estate planning typically involves a number of inter-related goals and objectives, it is highly recommended that you consult with an experienced estate planning attorney before making any decisions that impact your estate plan. It may help, however, to consider some of the most common factors that typically go into deciding whether to use a Last Will or a living trust as a primary distribution method for your estate assets.
- Avoiding probate – assets held in a trust are not required to go through the probate process. Therefore, those assets will bypass probate and can pass directly to beneficiaries much faster.
- Minor children – a minor child cannot inherit directly from your estate. Therefore, if you are the parent of a minor child, or you plan to have children in the near future, a trust is a better option to guard your child’s inheritance until he/she reaches the age of majority.
- Privacy – because a trust agreement is not part of the probate of your estate, the terms of your trust remain private. Therefore, gifts made using a trust agreement can remain private as well.
- Staggering an inheritance – if you are concerned about leaving a lump sum to a young and/or inexperienced beneficiary, a trust agreement allows you to stagger the inheritance you leave that beneficiary.
- Incapacity planning – the terms of a Will do not become relevant until the death of the Testator; however, the terms of a trust can apply in the event of incapacity as well as death.
Contact Vero Beach Estate Planning Attorneys
To learn more, please join us for an upcoming FREE seminar. If you have additional questions or concerns about which estate planning method to use to distribute your estate assets, please contact the experienced Vero Beach estate planning attorneys at Kulas & Crawford by calling (772) 398-0720 to schedule an appointment.
