Living Trust vs. Will — What is right for me?

Two of the most common ways to plan your estate are through a will or living trust, both of which allow you to designate the distribution of your assets when you pass away. Which one is right for you? We’ve broken down some key points for each to help you decide.

Living Trust

A trust is a pool of assets held for a beneficiary that requires a trustee to effectively manage and transfer the individual’s assets during their lifetime and beyond. When created during one’s lifetime, it is called a living trust. Living trusts offer flexibility, skilled investment management, continuity and protection in the event of illness or incapacity. Assets such as bank accounts, securities and real estate can all be transferred into the trust. The trustee named – it could be you during your lifetime – manages the assets according to the written instructions contained in the trust document. A successor trustee should be named in the trust document to take over should you die or become incapacitated.

Michele Cavalier, divisional senior vice president and chief fiduciary officer of Northwest, writes, “One of the most important decisions you will make in designing your estate plan is who you will designate as trustee to carry out your plan. Naming a corporate trustee can be very beneficial, especially when faced with unpredictable family dynamics. In the long run, the cost of a corporate fiduciary may prove to be lower than naming an individual trustee who must depend on retaining third parties to provide areas of expertise which a corporate fiduciary has the capability of providing.”

Once your living trust is drafted, you must make sure that you have taken the necessary steps to fund the trust by transferring assets you own individually in the trust. Surprisingly, most individuals assume that by merely drafting the trust document, this transfer automatically happens. Once this is accomplished, the trustee is responsible for managing the assets during life and as well as seeing to their disposition after the trust creator’s death.

Will

While the benefits may seem valuable, a living trust is not for everyone.

A will is a simple signed-and-witnessed legal document that explains how your assets will be distributed after your death. In your will, you can distribute assets outright or set up a testamentary trust. Your will also allows you to appoint a legal guardian for your children if both parents are deceased.

A will governs the assets held in an individual’s name after their death. One disadvantage to a will is that it can be challenged after your death and, in some cases, taken to probate court, making it public record.

Is a living trust or a will right for you? There is no simple answer, but according to Cavalier, “a good estate plan with a will or a trust allows you to control the distribution of your assets to whom you want, when you want and in the amount you want.”

 

To learn more about living trusts and wills, and to discuss your options, contact Trust Services today.