Posted by: The Life and Legacy Planning Group
Confused about the differences between Wills and Revocable Living Trusts? If so, you’re not alone. While it’s always wise to contact experts like us, it’s also important to understand the basics. Here’s a quick and simple reference guide:
What Revocable Living Trusts Can Do – That Wills Can’t
Avoid a conservatorship and guardianship. A Revocable Living Trust allows you to authorize your spouse, partner, child, or other trusted person to manage your assets should you become incapacitated and unable to manage your own affairs. Wills only become effective when you die, so they are useless in avoiding conservatorship and guardianship proceedings during your life.
- Bypass probate. Assets in a Revocable Living Trust do not pass through probate. Assets that pass using a Will guarantees probate (if the total of those assets exceeds $100,000). The probate process, designed to wrap up a person’s affairs after satisfying outstanding debts, is public and can be costly and time consuming – sometimes taking years to resolve.
- Maintain privacy after death. Wills are public documents; Revocable Living Trusts are not. Anyone, including nosey neighbors, predators, and unscrupulous “charities” can discover the details of your estate if your primary estate planning document is a Will. Revocable Living Trusts allow you to maintain your family’s privacy after death.
- Protect you from court challenges. Although court challenges to Wills and Revocable Living Trusts occur, attacking a Revocable Living Trust is generally much more difficult than attacking a Will.
What Wills Can Do – That Revocable Living Trusts Can’t
Name a Guardian for minor or incapacitated children. Only a Will – not a Revocable Living Trust or any other type of document – can be used to name guardians to care for minor children.
- Appoint an Executor. Wills allow you to name an Executor – someone who will take responsibility to wrap up your estate after you die. This typically involves working with the probate court, protecting assets, paying your debts, and distributing what remains to beneficiaries. But, if there are no assets in your probate estate (because you have a fully funded Revocable Living Trust), this feature is not necessarily useful.
What Both Wills & Trusts Can Do:
Allow revisions to your document. Both Wills and Revocable Living Trusts can be revised whenever your intentions or circumstances change so long as you have the legal capacity to execute them.
WARNING: There is such as a thing as an Irrevocable Trust, which can only be changed under certain circumstances, using very specific methods.
- Name beneficiaries. Both Wills and Revocable Living Trusts are vehicles which allow you to name beneficiaries for your assets.
- Wills simply describe assets and proclaim who gets what. Only assets in your individual name will be controlled by a Will.
- While Revocable Living Trusts act similarly, you must go one step further and “transfer” the assets into the Revocable Living Trust – commonly referred to as “funding.” Only assets in the name of your Revocable Living Trust will be controlled by your Trust.
- Provide asset protection. Revocable Living Trusts, and less commonly, Wills, can be crafted to include protective sub-trusts which allow your beneficiaries access but keep the assets from being seized by their creditors such as divorcing spouses, car accident litigants, bankruptcy trustees, and business failure.
While some of the differences between Wills and Revocable Living Trusts are subtle; others are not. Together, we’ll take a look at your goals as well as your financial and family situations and design an estate plan tailored to your needs. Call us today and let’s get started.