No matter the size of your estate, understanding wills vs. trusts is key to making sure your wishes are carried out as intended. Below, we’ve covered common questions about wills and trusts to help you decide which estate planning option is right for you.
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Wills and trusts are both important estate-planning tools, differing in distinct ways. Testamentary wills and revocable living trusts (these are what we discuss on this page) go into effect at different times, have different relationships to probate court, and have different levels of complexity.
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Wills tends to be more simple documents where you can name guardians for minor children and dictate which assets should go to which beneficiaries. A will becomes active only after the testator’s (will writer’s) death, and must pass through probate court.
Trusts (specifically, living trusts) are usually more complex than wills, holding assets so that they can later be distributed to beneficiaries. Assets cannot simply be named in a trust—assets must fund the trust, meaning their ownership has to be transferred to the trust. Trusts don’t pass through probate court and become active when the trustor signs the agreement.
Let’s break this down further:
Revocable Living Trusts
Deciding whether you need a will, a trust, or both can be a multifaceted and ongoing process. Knowing your options is the best way to ensure you choose a plan that works for you and your beneficiaries. Remember that the estate plan you need today may be different from the plan you need months or years from now. So even if you start out with only a will, you might decide to add a trust down the line.
A will is an important estate planning tool for most adults to have, and you’ll likely want to have one if you have minor children. But, not everyone necessarily needs a trust. Ultimately, deciding between a will and a trust—or deciding to have both in place—depends on your exact situation and hoped-for outcome.
Neither a will nor a trust is inherently better than the other. Here are a few considerations:
A will and a living trust are two separate legal documents, ideally working together to create a streamlined and clear estate plan. But if an issue arises between the two documents, a living trust will generally override a will.
Whether a will or a trust is more expensive in the long run depends on where you live, the size of your estate, and what assets are in your estate. Drafting a simple will may be cheaper than drafting a complex living trust. But the probate process for your will may be costly depending on the size of your estate and if any disputes arise. There might be fees associated with certain property transfers, or taxes that increase costs.
It’s impossible to say whether a will or a trust is cheaper from inception to property dissemination without knowing the specifics of a person’s circumstances. At Law on Call, we can talk through your situation and help figure out what estate planning option best for you.
Probate can be a long and expensive process that wills are usually subject to, while trusts are not. But, there are exceptions to the rule. Whether your will goes through probate, and how costly and time-consuming the probate process might be, depends on various circumstances.
Probate is the process through which a will is deemed valid and a deceased person’s assets are distributed. Depending on the circumstances of the estate—such as if a will is disputed or if the estate is substantial—the probate process can be lengthy and expensive.
But, probate can be useful. If you die with a lot of debt, probate limits how long creditors have to try and reclaim what they’re owed. Probate court can also determine how much each creditor gets if there aren’t enough assets to go around.
Probate can also be helpful if disputes arise over the will. While such disputes can lengthen the probate process and add expenditures to it, probate leaves the burden of validating the will and distributing assets to the court. When family dynamics are tense, probate can absorb some of that tension.
Not all states require wills to pass through probate. Washington, for example, requires that wills be filed with the court, but the probate process itself is optional.
The probate process is not inherently expensive. But costs usually rise because of legal fees. If a large and complex estate goes through probate, the fees associated therein will likely be higher than they would be for smaller and simpler estates.
Some states, like California, allow probate lawyers to charge a percentage of the estate. For the first $100,000 of a probate estate in California, lawyers can charge 4%.
There are a few ways to keep your estate (or at least a portion of it) out of probate. All but the first of these options are valid even if you only have a will in place. Rules vary by state, but here are a few ways to avoid probate:
To skip probate entirely, an affidavit is usually required. (An affidavit is a document signed under oath, in this case stating that a specific beneficiary is entitled to receive a specific asset.) In Illinois, this method can be used to avoid probate if willed assets (minus real estate) are less than $100,000. In Colorado, the total drops to $66,000.
If you have both a will and a living trust, the only assets subject to probate will be those that aren’t held by the trust. If assets are held in the trust, they will not go to probate.
For example, if your house funds your trust, it will pass directly to your beneficiaries without going through probate. But if your bank account doesn’t fund your trust, and your name is the only one on the account, then that account will need to go through probate before being passed to your beneficiaries.
If there is a discrepancy between what a living trust says and what a will says, the trust usually prevails.