and Living Trusts: The Basics
for the distribution of your estate (assets you own at the time
of your death) can be a very stressful experience. After all,
with so many important decisions to make, no one wants to make
the wrong one. One of the most common dilemmas is whether to
have a will or a living trust – or both. Knowing the fundamentals
of each will help you make the right decision.
begin with understanding probate, as it plays a significant
role in estate planning. Probate is the administrative and court
process that takes place after you die. It includes proving
the validity of a will (if there is one), identifying, inventorying,
and appraising property, paying debts and taxes, and (finally),
distributing whatever assets remain.
probate can drag on for months or even years, much of the wealth
you've accumulated over your lifetime can be eroded. Wills and
trusts have the power to reduce probate dramatically –
so your heirs can efficiently inherit what you want them to
A will is nothing more than a set of instructions that specifies
who gets what of your assets. If you have property and loved
ones, having a will is vital. If you die without one, state
law takes over and makes distribution decisions on your behalf.
In most cases everything goes to your spouse and/or children.
If you have neither, your closest relatives will be the recipients,
and if you have no relatives, your entire estate will be absorbed
by the state. While the court may make the same decisions you
would have, in many cases it does not.
of the most compelling reasons to draw up a will is if you have
children who depend on you for care. A will allows you stipulate
guardianship. Without one, the court will make this very personal
choice for you.
your estate is relatively simple, you may choose to create your
own will with the help of a quality software program or guidebook.
For more complex situations, or if you do not feel comfortable
writing your own will, hire an attorney or legal service to
do it for you. Because this is such an essential document, you’ll
want to be sure its done right. Consider investing in a lawyer
to at least look over your finished product.
A living trust is a bit more complicated in concept than a will,
but in essence it is a separate legal entity that holds title
or ownership to your property and assets. While you are alive,
and acting as the trustee, you hold full control over all the
property held in the trust.
primary reason to create a living trust is to avoid probate.
Property held in a trust won’t have to go through probate
before your loved ones receive their inheritance. More, where
wills are public, trusts are private, and usually harder to
with a will, you can create your own living trust by using software
and guidebooks developed for “do-it-yourselfers.”
However, living trusts by nature are often more involved than
wills, so having a lawyer draw it up for you in the first place
may be the better way to go.
everyone needs a living trust though. Before spending the money
to create one, be aware that they can be costly to arrange,
are time-consuming to put together, and require considerable
ongoing maintenance (adding to the cost). Changes to a trust
can take a long time, and moving certain assets such as real
estate, savings, and brokerage accounts into the trust requires
re-titling, which can be cumbersome.
Will Plus a Trust
Wills and living trusts are not mutually exclusive estate planning
devices. In fact, if you have a trust, you should probably have
a will to make sure all of your assets will be distributed according
to your wishes. Most trusts do not provide instructions for
everything in your estate. A will acts as a back up for what
is not included in the trust, as it would have a clause naming
a person who you want to receive all leftover property. Without
a will, anything you didn't transfer into the trust will go
through that long and expensive probate process. Once again,
those assets will be distributed according to state law –
and most likely not the way you would choose to have your property
estate planning certainly can be an anxiety provoking process,
knowing the fundamentals of wills and living trusts should ease