Let’s face it; we all worry about how our inheritance will be managed when we pass away.
All those years of hard labor, working day and night to build wealth and then investing the wealth in assets, only to leave the assets mismanaged by somebody.
Nobody ever wishes for such a possibility. If anything, we want to be certain our assets are let in the best hands.
One way to ensure this is to set up a will or a revocable trust.
But between these two, which one is actually right for you?
That’s a question we look to examine in this post.
What’s a will?
A will, also called a testamentary will, is a legally enforceable document stating how you want your affairs handled and assets distributed after you die.
For example, if you have estate properties, cars, shares, and other monetary investments, a will is what will tell how you intend for these assets to be distributed.
In the case of your minor-aged children or grandchildren, a will can also state whose hands you want the guardianship of your kids to fall in.
What Is a Revocable Living Trust?
A revocable living trust is a legal document, or trust, created during an individual’s lifetime where a designated person, the trustee, is given responsibility for managing that individual’s assets for the benefit of the eventual beneficiary. A living trust is designed to allow for the easy transfer of the trust creator assets while bypassing the often complex and expensive legal process of probate. Living trust agreements designate a trustee who holds legal possession of assets and property that flow into the trust.
Unlike a will, however, a living trust takes effect right from the lifetime of the trustor, saving all involved from the rigorous and expensive procedure of court probate when the settlor dies or becomes incapacitated.
Seeing as both a trust and a will fulfill similar objectives, most asset owners find it tough to make a decision between the two.
Should I set up a will or create a trust?
A revocable trust will be a good option for you if you’re concerned about keeping the flow of assets to beneficiaries private. Living trusts will keep all records and information regarding the transfer of your assets private, making them only accessible by the trustee and yourself.
Will, on the other hand, relies on a probate court’s rulings, meaning that your estate and other assets are an open book, available for anyone to access.
Avoidance of Probate
Probate is the legal process of transferring assets from the owner to beneficiaries.
In practice, probate involves presenting documents to a probate court and going through a multi-step process before property ownership or kid guardianship is awarded to beneficiaries.
This can be a really tedious process, especially if you have properties in different states.
With a living trust, however, you can save your children and grandchildren from the rigors and expensiveness of probate rulings. This way, assets will be transferred to them faster.
The living trust allows you to make changes (or amendments) to the trust document while you are still alive, at your own discretion.
Trusts are a great option if you have minor-aged children
Another important advantage of a trust is how it allows the asset of the trustor to be managed by a trustee for the eventual benefit of the beneficiary. This means that even if you pass away or become incapacitated earlier than imagined, your assets will be in good hands until your children are at the right age to access them.
Living trusts removed challenges to the Estate
It is not uncommon to see wills causing disputes and disagreements amongst family members upon the death of the creator. These disagreements often result in lengthy court proceedings and legal actions from the various parties involved.
In most cases, the judge will decide which version of the facts presented he wants to accept.
Unfortunately, the version he accepts (based on his discretion) may not be in line with what the asset owner (you) would have wanted.
By using a trust, you can specifically disinherit anyone who poses a challenge to your wishes upon your death.
Compared to wills, living trusts offer privacy, control, and flexibility over the distribution of your assets.
It also saves intended beneficiaries from lengthy legal proceedings and costs.
But do bear in mind that living trusts require substantially more effort and higher costs to set up.
Making an Estate Plan can be overwhelming. We recommend attending an Estate Planning Basics Workshop. You will be able get all of your questions answered at no cost by a local estate planning expert.
Interesting related article: “What does Inheritance mean?“