Information on Living Trust & Wills
Living trusts and wills can both serve as devices for the distribution of possessions after death. Determining which device can best serve estate distribution can include considerations such as privacy, taxes, probate procedures and estate size. Both documents instruct survivors, executors and trustees regarding final wishes and estate dissolution, but each device has different benefits and levels of property control before and after death.
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Will Benefits
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A will serves as legal instructions for the distribution of property after death, with the oversight of the court system. People who wish to leave specific items to particular individuals can make their wishes known in a will, including guardianship of surviving minor children. Upon death, an executor, defined in the will or appointed by the court, oversees the dissolution of the estate.
Living Trust Benefits
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Living trusts transfer all or a portion of estate property into a trust before death. The device assigns a trustee, which can be the owner of the estate, to control the legal title to property. The living trust can also define use of trust income before death or financial management of property in the event of disability or incapacitation. Married couples can establish joint living trusts, which combine assets of both parties into one trust. Establishing a living trust does not eliminate the need for a will. People who draft living trusts typically draft a pour-over will, which transfers all omitted property into the living trust upon death.
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Probate Process
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The probate court supervises distributions of estate property and settles debts. Wills must go through a probate court process upon death. In the absence of a will, a probate court decides the distribution of assets, typically awarding property to the closest relatives. The court decides guardianship of surviving children, but judges typically consider instructions left in wills. The probate court supervises all challenges to the will instructions and settles disputes between the estate and creditors. The content of the will becomes part of the public record, allowing the public to view details of debt and assets. Living trusts do not require a probate court process. Accordingly, the details of a living trust remain private, but a court does not automatically resolve disputes. Upon death, a successor trustee defined in the living trust transfers the ownership of property to beneficiaries.
Costs
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When employing a lawyer, drafting a will can cost less than establishing a living trust. Wills can incur more costs during probate, and a living trust can require management costs before death. Basic wills and trusts do not require a lawyer to establish the documents. Software programs and will-writing books can offer the tools and references needed for uncomplicated estates.
Tax Considerations
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Living trusts and wills often face the same estate tax consequences. Simple or small estates often do not require beneficiaries to pay estate taxes. Large joint living trusts can face estate taxes, but attorneys can often draft trusts that help minimize tax consequences. Taxes paid on an estate, if any, depend on the value of the assets.
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