Living Trust Versus Will: Which Is Right For You?

Determining whether a living trust versus a will is more suitable for you and your beneficiaries is vital to estate and retirement planning, not to mention essential to the bigger picture of your finances. After all, you wouldn’t want the remainder of the assets you worked so hard to accumulate for a comfortable retirement to fall into the wrong hands once you’re gone. Though discussing details regarding your eventual absence from your beneficiaries’ lives may be hard, neglecting the arrangements could have disastrous results.

Living Trust vs. Will

Living Trust: A living trust, also known as a revocable living trust, is a legal document that essentially ensures your assets, property and investments are managed according to your wishes, especially if you, as the trustmaker and primary trustee, ever become mentally incapacitated or otherwise unable to make decisions.

While you are alive and well, you will own the assets in the trust, but you will also need to designate a successor trustee to manage your assets and distribute them to your beneficiaries if anything were to happen to you. A living trust is in effect before and after death, so there can be considerable costs to maintaining one.

Will: A will, on the other hand, goes into effect only after you die. Also known as your “Last Will and Testament,” the legal document will allow your designated executor to administer your assets to your beneficiaries. Do not confuse a will with a living will, which is only designed to give your power of medical attorney to decide your treatment for you in case you are incapacitated but still alive.

Benefits of a Living Trust

While the laws differ from state to state, the biggest differences between a living trust and a will is the probate process. Living trusts do not require a probate proceeding and thus eliminates that cost. Since the successor trustee will already be the legal administrator of the assets listed in the trust, there is no need for the probate, which can cost several percentage points of the entire estate.

A living trust also allows the administration of the estate without court supervision. The main benefit here is that your private matters remain private, as opposed to a will with court supervision. Once that happens, your will becomes public record.

Benefits of a Will

There are some benefits to choosing a will over a living trust that you should also consider.  Wills are less expensive to maintain since they don’t require as much constant upkeep. While wills are typically less complicated and less costly to set up than living trusts, once the testator–the person who made the will–dies, the process to distribute the estate can actually get pretty messy. Wills can be contested, the probate can drag on and legal expenses could add up.

However, some estates can avoid probate if the total value of assets falls below a state-set minimum. Depending on your state and the combined value of your assets, you may be eligible.

Best Decision for You and Your Beneficiaries

There are many advantages a living trust offers over a traditional will, but that’s only if you’re willing to put in the time and effort to maintain it. Living trusts give you more control over your assets while you are alive, offers you some protection if you’re incapacitated and provide a way to distribute your assets to your beneficiaries without probate.

Additionally, it can be easily established on your own using living trust software if you’re savvy enough with your finances. If you choose to go this route, you should at the very least check out a few living trust samples to get a feel for what you’re doing. However, given that setting one up can be quite complicated, it’s best you at least speak with an estate-planner or tax attorney first.

You can also save a lot of money by avoiding probate fees and headaches like someone contesting your will. Using a living trust also gives you more control on how your assets are handled after your death because it cannot be challenged like a will after you die. It can be contested while you are alive, however, but at least you will be around to defend yourself.

Ultimately, the choice is yours, but it’s making that choice and implementing the steps necessary to devise a solid plan  for your estate that’s most important. A big part of saving for retirement is also designating who will receive those funds after you’ve passed on so your lifelong efforts will continue to benefit the ones you love.