If you take a good look, you may discover that you have more assets than you thought. Think about a car, jewelry, or family heirlooms. Or maybe you have some equity in your home or a piece of land somewhere. Even if they don’t have a great deal of monetary value, they still may have sentimental value for members of your family. A will can help make sure that these items wind up in the right hands.
Search
Learn the differences between a living trust and a will
Do you want to make things easier for your loved ones when you pass away? If so, you will need to have either a will or a living trust in place. Not sure which one to choose? This article will explain the major differences between the two options and help answer any questions you may have.
What’s the difference between a living trust and a will?
While wills and living trusts are both legal documents that you can use to communicate your wishes and distribute your assets, that’s pretty much where the similarities end. Let’s look at the differences between a will and a living trust and see why you might choose one over the other.
How a will works
A will is a relatively simple estate planning document that will speak for you at the time of your death. When properly crafted, a will should clearly explain what you want done with your personal property (home, car, jewelry, artwork, etc.), as well as your financial assets (your savings, investments, retirement accounts, and such). If you have young children or other living dependents at home, your will should also appoint a guardian who will take care of their needs until they reach adulthood. In most cases, the assets mentioned in a will are required to go through the probate process, which is a legal proceeding designed to make sure that there are no property liens, overdue taxes, or other outstanding debts that must be paid before the assets can legally change hands.
What happens if you don’t have a will?
If you pass away without a will, the state where you live will decide what happens to your assets and dependents. In most states, the surviving spouse or the closest living relative will inherit everything, but not always. That’s why it’s so important to have a will and to make sure you update it whenever your family or your financial circumstances change.
How a living trust works
As the name suggests, a living trust is a legal arrangement that goes into effect while you are still alive. In this case, you are transferring assets into an account that will be managed by a third party, who is known as a trustee. The trustee will invest and administer the account according to your instructions and then oversee the distribution of your assets after your death. What makes a trust different from a will, however, is that the trust can continue to operate even after you’re gone. This distinction can be especially helpful for parents of a child with special needs or wealthy parents who want their children to receive their inheritance gradually or perhaps at a specific age (say, their 30th birthday).
Are there any other reasons to use a living trust?
Living trusts are also important because they help you avoid what can sometimes be a long and costly probate process. Since the assets in a trust do not have to go through probate, it can be a much quicker and easier way to transfer wealth to your heirs. Also, some trusts (known as irrevocable trusts) can help reduce your tax burden because they take taxable assets out of your name and transfer them into the trust.
In conclusion:
Whether you choose a will or a living trust, it’s important to make sure that you do not leave the division of your assets up to your state. Once you have either a will or a living trust in place, you can rest assured that your final wishes will be carried out and that you helped make this difficult time a little easier for your loved ones.
Frequently asked questions
Unless you have a large family or a complex estate, a will should meet your needs. If you want to avoid probate, however, you may want to look into setting up a simple trust.
While a will is generally easier and less expensive to set up than a trust, the price of each can vary greatly. It all depends on the complexity and the number of hours involved. In most cases, you should be able to get a rough estimate of the cost during your initial meeting with a trust officer or lawyer.
A revocable trust is an agreement that you can alter or dissolve at any point during your lifetime. To change an irrevocable trust, a complex legal process may be required. (The requirements depend on the laws of your state.)
RELATED CONTENT
Want to learn more about wills, trusts, and estate planning?
A New York Life financial professional can coordinate with your legal advisor to help determine what’s right for you.
SUBSCRIBE
Living your best life!
Make sure it's secure with our retirement products and solutions.
Thank you for subscribing!
Neither New York Life Insurance Company nor its agents provide tax, legal, or accounting advice. Please consult your own tax, legal, or accounting professional before making any decisions.
Source Material:
https://www.ncoa.org/adviser/estate-planning/living-trust-vs-will/
https://www.freewill.com/learn/benefits-of-a-living-trust
https://www.freewill.com/learn/revocable-trust-vs-irrevocable-trust