The wide world of estate planning is much faster than most people realize. There are so many estate planning tools of which you might not even be aware but can accomplish important goals for you and your family. Thus, it is worth your time to learn about your options. Did you know, for instance, that there are different ways you can have your assets distributed to your beneficiaries upon your death? It’s true! While a will is perhaps the most popular and well-known vehicle for property distribution, it is by no means the only way. For example, a living trust could also be used. What differentiates the two? We’ll take a closer look here at what distinguishes a will from a living trust.
What Differentiates a Will from a Living Trust?
While both are valuable estate planning tools which work to ensure that your assets are both protected and properly distributed to the right beneficiaries upon your passing, a will, and a living trust are different in some very important ways. One way the two differ is in the timing of when they actually become active. You see, a will only becomes active after the testator, the person who created the will, dies. Until then, a valid will is simply a formal legal document with certain formalities, such as witness signatures or being notarized, but has no legal force while the testator lives. A living trust, on the other hand, becomes active the day the grantor, the creator of the trust, creates it.
In order to have your assets distributed via a will, you need only state the asset and the corresponding beneficiary in your validly executed will. In order to use a living trust as a vehicle for asset distribution upon your passing, it is not so simple. There is an additional step of central importance. The trust must be properly funded with the assets you wish to distribute to your beneficiaries upon your passing. Only that which is properly held in the trust will be distributed through the living trust. In order to fund a trust, the ownership of an asset must be transferred to the trust. Yes, the ownership of the asset must be held by the trust. Otherwise, the asset falls outside of the trust.
It is likely worth the extra effort it takes to establish and properly fund a living trust, however. You see, there are so big benefits to having property distributed via a living trust as opposed to a will. One of these benefits is the fact that assets held in a living trust will not go through the probate process whereas assets distributed via a will go through probate. There are a number of reasons why one would be invested in avoiding probate. The court-supervised process of administering the estate of a deceased individual is, among other things, stressful. It is also notoriously time-consuming. Beneficiaries must wait until the end of the process before receiving any inheritance. When you consider the court costs and other legal fees, probate can also be very expensive. Also, on top of all of this, probate is a matter of public record and, thus, affords little privacy to the testator’s wishes.