What Is the Difference Between a Revocable Living Trust and a Probated Will?
Although it isn't one of the most pleasant subjects to discuss, estate planning is a necessity for many people. When planning the disposition of your assets, you may need to choose between placing your assets in a living trust and creating a will to provide for their disposition.
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About Living Trusts
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When you create a revocable living trust, you create a separate entity that holds your assets until your death. You can continue to use the assets during your lifetime, and when you die, they will pass to the beneficiaries you name in the trust contract. You must also name a trustee to oversee the activity of the trust. If you name yourself as trustee, you must also name a successor trustee to oversee the trust after you die. Trusts do not have to go through probate. Because the trust is revocable, you can change the beneficiaries, trustee and successor trustee any time you want. You can also add or remove assets as you see fit.
About Wills
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A will is a document you draft that describes how you want your assets divided after you die. When you draft a will, you must typically name an individual to act as executor after your death. An executor is an individual who oversees probate and carries out the actions described in your will. If you don't name an executor, or if the executor you name doesn't wish to serve, a court will typically appoint a third-party administrator to oversee probate and the disposition of assets. A will has no effect on your property while you're alive, and wills must typically be probated in all states.
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Comparisons
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A will must typically pass through probate, which is both expensive and time consuming, but a revocable living trust can avoid probate and pass your assets directly to your heirs after you die. However, wills are much easier to create than living trusts. They involve less paperwork and lower attorney fees. In addition, when you create a trust, you must transfer each asset into it individually, but wills involve no transfer of assets.
Considerations
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While a revocable living trust helps you avoid probate, it won't prevent your creditors from seizing the assets it contains, nor will it prevent you from paying taxes on the property while you're alive. To avoid probate using a trust, you must title the assets to the trust while you are alive. If you name the assets in the trust contract but fail to change the name on the assets' titles, the assets must go through probate with the rest of your estate. Most states only probate estates with values that exceed a certain amount, so smaller estates don't necessarily need a trust to avoid probate.
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References
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