Wills and living trusts are the two most frequently used documents for estate planning. When drafting your estate plan, it’s a good idea to understand some of the similarities and differences.
Wills In a Nutshell
A will, also called a “last will and testament,” is a written, legal declaration of your wishes for how your property and wealth will be distributed after your passing. If you have children, a valid will also enables you to name a person who will look after them.
Living Trusts In a Nutshell
With a living trust, you can control how your assets are handled both during your life and after your passing. A living trust gives you authority over the trust assets while “owning” the property listed in it. These assets will then be transferred to the beneficiaries you specify after your death.
What Wills And Trusts Have In Common
Living trusts and wills are very different legal documents with distinct functions—but there are also similarities.
Both specify beneficiaries for assets.
Both include provisions for asset distribution.
Both let you name a guardian(s) for minor children.
Both allow you to plan for your minor children’s future.
Both let you designate a person to handle your business and administer your estate after your passing. For wills, this is an executor.” For living trusts, this is a “trustee.”
Both allow you to select an organization—like a bank—as your executor or trustee.
Both provide options for modification before death.
Both allow you to specify how certain funds will be used to pay off debts and taxes.
How Wills and Living Trusts Differ
A living trust is viewed as a completely independent legal entity from you as an individual. As a result, living trusts offer some protections that wills do not. As you create your estate plan, it’s crucial to understand the differences between the two.
After your death, a living trust adds a helpful degree of privacy protection. Unlike wills, living trusts are not public.
Where wills and their assets must go through a potentially long and involved probate process, living trusts do not.
Setting up a will is relatively inexpensive, but probate can be a hassle. In contrast, living wills can cost three or four times as much to set up but bypass much of the probate process.
Your assets, including real estate, must be retitled and transferred to the living trust since those assets are now held in a trust which is distinct from you. In wills, your property remains your own until you transfer it to someone else or you pass on.
The recipients of the property in a trust are not subject to inheritance or estate tax, unlike the beneficiaries of a will. The federal gift tax can still apply, however.
Shouldn’t a Will Be Enough?
Many individuals create a living trust in addition to their will to afford their heirs and beneficiaries an increased level of security over a portion of their estate.
Need More Help? Heban, Murphree & Lewandowski, LLC, Ohio’s number one source for probate law news, can help! Give us a call, 419.662.3100 or check out the infographic below for more information!
John Lewandowski is an Ohio-based attorney specializing in probate litigation and inheritance disputes, with extensive experience arguing cases in front of various courts, and is a member of several professional organizations.