Even if you only have a rudimentary understanding of estate planning, you’ve probably heard of wills and living trusts. In simple terms, wills and living trusts are legal documents that provide instructions about what should be done with your belongings after you pass away. Depending on the document, it may also designate caretakers for your minor children and/or pets. In the case of a living trust, the document can also be used to manage your property during your lifetime.
A Closer Look at Wills and Revocable Living Trusts
Now that you have a basic understanding of wills and living trusts, it’s time to take a closer look at each type of document so you can determine which one is right for you. To start, it’s important for you to understand that there is more than one kind of living trust. While you can change a revocable living trust during your lifetime, you cannot change an irrevocable living trust. For the purposes of this discussion, we will be talking about revocable living trusts exclusively.
A will is a written legal document that must be signed by you and witnessed by at least two people who will not inherit anything from you. A will informs your executor how your property should be distributed when you die. You can change your will at any point during your lifetime if you are still of sound mind. You can use your will to designate guardians for your children and your pets and you can appoint someone to manage the things you leave your children.
A revocable living trust is an instrument you can use to manage your property before and after your death. If you are the trustee of your trust during your lifetime, you should appoint a successor to manage your trust after you pass away or if you become incapacitated. A living trust is useless unless you fund it by placing assets in it and signing ownership of those assets over to the trust.
In general, revocable living trusts are a good idea if you want to:
- Avoid probate
- Make arrangements in case you become incapacitated
- Control what happens to your assets after you die
- Keep your affairs private
When a person dies, their will becomes a matter of public record and, depending on the size of their estate, their assets will be subject to probate. With a living trust, your estate will not go through probate and the plans you made for your property will remain private.
Will vs Living Trust: Which Is Right for You?
If you don’t have a will or living trust in place at the time of your death, your property will be distributed in accordance with the laws of your state. To prevent this from happening, it’s vital for you to seek out a living will attorney and/or a living trust attorney to create documented plans for your estate.
While that may seem obvious, whether you need a revocable living trust, a will or both may not be as clear. The kind of document(s) you need depends on various factors, such as your marital status, the age of your children, and the size of your estate. Even if you set up a living trust, you may still need a will because you cannot use a trust to do certain things such as appoint guardians for your minor children.