Wills vs. Trusts: In Plain English

What is a living trust vs. will, and which should you use for your estate planning process? While both documents can be helpful in directing the allocation and gifting of your assets, it’s only the living trust that allows you to avoid the expensive and time-consuming probate process. Find out more about the distinctions between these documents by reading this post from Max Alavi APC, OC Trusts Lawyer.

Wills vs. Trusts

Most of us are familiar with wills and trusts and have some basic awareness that these two types of documents can both be used in the estate planning process. And while there have been countless articles written about these documents, these articles often mistakenly assume that everyone knows the basics of what these documents are, how they work, and how they differ. The reality is a little bit more complicated: Wills and trusts are rooted in centuries-old law, which means it can be difficult to ascertain their nuances and complexities.

So, what should lay people know about the core distinctions between a will and a trust? In this post we’ll not only explain what these two documents are, but also advise you on why having a will alone is usually not enough; to ensure successful transfer of your estate to your intended heirs, having a trust is highly recommended.

What is a Living Trust vs. Will?

Let’s start by defining our terms. When we talk about wills and trusts, what exactly are we talking about?

What is a  Will?

The most basic of estate planning documents, a will is considered a “death” document as it only goes into effect when you die. To be effective, your will must be signed and witnessed. You’ll generally want to keep a copy at your home, leave another copy with your attorney, and maybe even distribute a copy to a trusted family member. Additionally, wills should be reviewed and revised periodically, especially following any major changes to your family or to your financial status.

So, what exactly does a will do? In brief, a will:

• offers direction for how your assets and property are to be gifted or allocated upon your death, with the exception of certain types of accounts and property that are allocated on the basis of beneficiary designations (think life insurance or retirement accounts);
• ensures that any assets or accounts in your own name must eventually pass through the probate court before they can be distributed to your loved ones;
• lets you name someone to serve as a guardian for any children you have who are still minors;
• names an executor or personal representative to help wind up your affairs after your death;
• allows you to change any of these decisions during your lifetime;
• has a lower upfront cost then a trust but may cost more in the long run after you factor in probate expenses.

What is a Living Trust?

The living trust (and specifically the revocable living trust, which is what we’re talking about here) is a legal relationship wherein you (the creator of the trust) appoint someone else (a trustee) to manage all assets within the estate, on behalf of the intended beneficiaries. A trust document is effective during your lifetime, during any period of disability, and after death. Because the trust is effective during your lifetime and you can change it, it is referred to as a “living” document. (Remember that wills, by contrast, are considered to be death documents.)

And what can you do with your living trust? A trust:

• gives direction for the gifting and allocation of your property, all of which is placed in the name of the trust (as opposed to being put in your individual name);
• allows you to avoid the probate process, assuming the trust is properly drafted and fully funded;
• names a back-up trustee, should the initial trustee die or become incapacitated;
• often includes protective measures for your beneficiaries and tax planning;
• lets you make changes or even dissolve the trust during your lifetime; and
• has a higher initial cost but may save you money in the long run, as trusts help you sidestep the probate process.

Choosing Between a Living Trust vs. Will: Understanding the Probate Process

One key element in deciding between a will and a trust is understanding the probate process.  Basically, probate refers to the legal process wherein the courts will verify that your assets are being rightly allocated to the intended beneficiaries.

Going through the probate process will bring a number of issues for your heirs. For one, probate can be costly, cutting into the overall value of the inherited estate. Secondly, probate is usually quite time-consuming. And finally, the proceedings of the probate court are entirely public, meaning the contents of the estate may be known by everyone. The only real upside to probate is that once this court process concludes, creditor claims are cut off permanently.

So where do wills and trusts come into play? If you have a will but not a trust, and if you own property in your own name, going through probate court is a guarantee. But on the other hand, if you use a trust as your primary estate planning tool, the accounts and property are owned by the trust, not you. This means you can avoid probate, and spare your beneficiaries a lot of hassle, headache, time, and expense.

Living Trust vs. Will: The Bottom Line

The majority of people can benefit from having a living trust, not just a will, to reflect their wishes for asset distribution upon their death. With that said, everyone’s situation is unique, and making an informed decision means meeting with a skilled trust attorney.

Max Alavi APC, OC Trusts Lawyer, has a proven track record helping clients navigate tough estate planning decisions. Call any offices in Orange County or Long Beach now to schedule your in-person or virtual meeting. We will help you determine whether a will or a trust makes sense for your situation. You do not have to make these decisions alone. Reach out to Max Alavi APC, OC Trusts Lawyer, at your convenience.