So, you’ve worked hard and invested wisely and you’ve finally put together a solid estate with some property to pass on to your loved ones. However, you’re now faced with a tough decision — what’s the most efficient, cost-effective way to leave the property for which you’ve worked so hard to the people that you love? There are three types of documents that specify what you’re leaving and to whom. They are the Last Will, the Revocable Living Trust, and the Irrevocable Living Trust. Each has its own set of advantages and disadvantages.
The first, and most well-known, is the last will and testament. The last will is the simplest and least expensive document of the three. Advantages to a last will include the ability of the testator to name the guardians of their young children when they die, the ability to name the executor of the estate, and the ability to designate beneficiaries.
There are a few disadvantages to creating a last will, as well. Most importantly, there is a probate process that begins when the will’s executor presents the will in the courthouse where the decedent lived or owned property. Although it is generally not too bad, this process can be lengthy and expensive. Another disadvantage is that a will becomes a matter of public record once it has been executed, so it’s not a good option if privacy is a priority.
A living trust is a bit different from a will. Your assets are placed in a trust while you are still alive, then distributed to pre-specified beneficiaries when you die. For the trust to function properly it’s important to be sure that all of your assets are included. This requires some maintenance, so the living trust can be a bit more expensive than a will.
The most common reason for creating a living trust instead of a will is the avoidance of the probate process and, in some cases, future creditors. Property left through a living will isn’t required to go through a probate process, which means that your beneficiaries will collect the property more quickly and without the fees associated with a probate attorney. Also, the contents of the living trust never become public, so the living trust is a better option if privacy is important. Instead of an executor, the living trust allows you to appoint a successor trustee who will carry out the terms of the living trust (and only property that is owned by the trust) once you die or become incapacitated. If you need to put someone in charge of property outside of the trust, you may assign someone Power of Attorney. These items may include life insurance, retirement accounts, annuities, or even bank accounts that have been kept outside the trust.
Revocable vs. Irrevocable
There are two general categories of living trusts. A revocable living trust is the more versatile because, as the name suggests, you can adjust it as needed. Property can be removed from the revocable living trust. The person who creates the trust can also change the beneficiaries or eliminate the trust altogether.
An irrevocable living trust provides less flexibility than a revocable living trust, but it provides certain advantages, as well. You can’t retrieve property once you’ve put it into an irrevocable trust, and you can’t eliminate the trust (except under certain limited exceptions).
The type of will or trust that you choose depends entirely upon the value of your estate and how you’d like it used before and after you die. Each of the options has its own distinct advantages and disadvantages. There are right ways and wrongs ways to plan for how your estate is handled, and it’s extremely important to turn to the expertise of experienced estate planning attorneys to help you make the correct decision. The experienced attorneys of Carr | Woodall have more than six decades of combined experience handling estates of every size, and can save your loved-ones time, money, and effort when it matters the most.