Eventually, death comes for us all. When it does, most of us leave behind some form of property or other assets that we have managed to accumulate during our lives. In most instances, people have very specific ideas about how they would like their property distributed after they die. If you fail to take the opportunity to declare those wishes during life, the state will decide how your assets are distributed when you are gone. To avoid that, most people use some form of estate planning tool to document their wishes and provide for easy transfer of assets when they die. Often, that probate choice comes down to choosing between a simple last will and testament or a more complex estate plan involving something like a living trust.
Each has its own unique advantages and disadvantages, while also offering different possibilities for probate. To ensure that your estate plan is the right one for your needs, it is important to learn about these differences and the profound effect that your estate planning choice can have on the manner in which your assets are passed on to your loved ones.
The Last Will: Advantages
Most adults have at least some familiarity with the concept of a last will. This is the most basic estate planning tool out there, and allows testators to declare their estate intentions at almost no cost. In fact, there are many last will forms that can be downloaded online at little or no charge. There are a number of advantages that can be enjoyed by those who use these forms:
- They’re inexpensive and often require no legal assistance to complete
- They offer flexibility and can be altered when necessary, with minimal effort
- They enable testators to dictate a variety of personal matters beyond financial concerns, including the care of his children, the treatment of his pets, funeral arrangements, and so on
The Last Will: Disadvantages
While flexible and easy to create, wills leave your assets subject to federal estate taxes, if they apply, and – depending on where you live – possible estate or inheritance taxes levied by the state as well. In addition, wills typically must go through the probate process if there are any probate-covered assets in your estate. That process can be both costly and time-consuming, and leaves open the possibility for challenges to your stated wishes. Privacy can also be a concern, especially if you don’t want your bequests to be made public, or have other reasons for wanting the process kept out of the public eye.
The Living Trust: Advantages
You can obtain many of the same benefits without being subject to probate by using a living trust instead. With a trust, the beneficiaries are the only ones who receive notice about your wishes, and even they are not entitled to automatically receive notice as to the full value of your estate. Living trusts provide greater control over your assets, including income and investment vehicles, and leave you with the power to control your entire estate for as long as you live. A trustee must also be named, and that person takes over your role after you pass away.
With a living trust, your assets are titled in a way that keeps them from being subject to the estate tax. That enables you to ensure that even more of your estate’s value is there for your beneficiaries when you die, rather than having a substantial amount of money turned over to the government. And since you establish this trust and manage it during your lifetime, there are tax benefits even before you pass on.
The Living Trust: Advantages
Living trusts lack the flexibility offered by last wills, since they are really only effective at managing the disposition of actual property and things of value. They cannot, for example, be used to declare where your children should be raised, or express your wishes with respect to funeral arrangements and similar matters. These estate planning vehicles are also more expensive and time-consuming to establish, since they typically require legal assistance at the point of creation and must be funded as you form them. Finally, the fact that living trusts help to avoid the probate process also means that there is no court supervision to guard against fraud or abuse by untrustworthy administrators.
Which should you choose?
For truly comprehensive estate planning, your best option is to choose both. While a living trust offers tremendous financial benefits both during life and afterwards, its inflexibility leaves certain affairs subject to intestate procedures if you fail to execute a will. To avoid that, and to ensure that all of your last wishes are documented for posterity, you should create a last will that clearly states how certain personal matters should be dealt with after you are gone.
Your living trust can then be used to hold titled assets that you want to keep out of the probate process and better protected from tax implications. Together, those two estate planning vehicles can provide the comprehensive plan you need to ensure that all of your assets go where you want when you die, without the expense inherent in the probate process.
Don’t Do It Alone
None of this should be attempted without legal experience, of course. While there are forms that you can find at minimal cost online, even they cannot provide you with the assurances you need when you want to avoid complications. An improperly designed will is more likely to be challenged in probate court, and poorly crafted trusts may not provide your assets with the protection they deserve. Competent legal assistance can help to avoid those concerns.
The law firm of Barbara M. Pizzolato, P.A. has the experience and expertise you need to resolve all of your estate planning concerns, and can help you to avoid the most common pitfalls that afflict those who try to handle their estate planning on their own. Give us a call today to discover more about how we can help you make sense of your estate needs and create the last will and living trust you need to properly execute your wishes when you’re gone.