Are you thinking about your estate plan but confused about whether to go with a living trust or just stick with a traditional will? This decision is super important and I totally get why it can feel overwhelming. After helping countless clients navigate this choice I’ve put together this guide to explain why a living trust might be the better option for many people.
Let’s be honest: no one likes to think about what will happen after they die. However, trust me when I say that picking the right tool for estate planning now will save your loved ones a lot of trouble later on. Let’s look at why a living trust is often better than a simple will.
What’s the Difference Between a Living Trust and a Will?
Before we get into the advantages, let’s clarify what these documents actually are:
A will is a legal document that provides instructions for distributing your assets after death. It names beneficiaries, designates a trustee, and can appoint guardians for minor children. Wills must go through probate court.
A living trust, which is also known as a revocable trust, is a legal arrangement that lets you give assets to the trust while you are still alive. You can be a trustee while you’re still alive and make changes to the trust as needed. When you die, your assets are given out by a successor trustee based on your instructions, without the court getting involved.
Now let’s look at the reasons why many people prefer living trusts:
1. Skip the Dreaded Probate Process
Probate is that court-supervised process that validates wills and oversees asset distribution. It’s kinda like watching paint dry, except more expensive and frustrating.
With a living trust, your assets completely bypass probate. Why? Because technically, the trust owns your assets, not you. When you pass away, there’s nothing to probate – your successor trustee just follows your instructions and distributes everything.
The benefits of avoiding probate include:
- Faster asset distribution – Probate can drag on for months or even years. Trust administration typically takes weeks.
- Reduced costs – Probate fees can eat up 3-7% of your estate’s value. For a $500,000 estate, that’s $15,000 to $35,000 just gone!
- Less headache for your loved ones during an already difficult time
2. Keep Your Private Business Private
Do you want everyone knowing what you owned and who got what when you die? Probably not.
When a will goes through probate, it becomes public record. Anyone can walk into the courthouse (or sometimes just search online) and see details about your assets, debts, and who inherited what. Yikes!
A living trust administration happens privately. No court filings means no public record of your assets or beneficiaries. This privacy is especially valuable if you:
- Have substantial assets
- Have complex family relationships
- Simply value your privacy (don’t we all?)
3. Plan for Potential Incapacity
A will only goes into effect when you die, which is something many people don’t know. It does absolutely nothing if you become incapacitated.
If you become unable to manage your affairs with only a will in place, your family might need to go through a lengthy court process to have someone appointed as your guardian or conservator. This can be expensive, time-consuming, and may not result in the person YOU would have chosen.
With a living trust, you’ve already chosen a trustee who can take over if you become unable to do so. There’s no need for the court to get involved; your trustee can handle your property the way you want until you get better or die.
4. Greater Control Over Asset Distribution
Wills typically provide for outright distribution of assets all at once. But what if you don’t want your 18-year-old to get their entire inheritance in one lump sum?
Living trusts give you way more control over how and when your assets are distributed. You can:
- Stagger distributions at certain ages (like 25, 30, and 35)
- Set up conditions for inheritance (like finishing college)
- Create special provisions for beneficiaries with disabilities
- Protect assets from your beneficiaries’ creditors or divorcing spouses
This level of control helps ensure your assets are used according to your wishes and protects beneficiaries who might not be ready to manage large sums.
5. Harder to Challenge
We’ve all heard the stories – someone dies and suddenly relatives come out of the woodwork to contest the will. It happens more than you’d think.
Living trusts are generally more difficult to challenge than wills. Since the trust was established and actively managed during your lifetime, it provides stronger evidence of your intentions and mental capacity.
While no document is 100% challenge-proof, the higher bar for contesting a trust can discourage frivolous claims and better ensure your wishes are followed.
6. Works for Multiple States
Do you own property in different states? If so, a will could subject your estate to multiple probate proceedings – one in each state where you own real estate. Talk about complicated!
A living trust can hold property from multiple states, avoiding the need for separate probate proceedings in each location. This saves time, money, and headaches for your successor trustee and beneficiaries.
7. Potential Tax Benefits
While revocable living trusts don’t directly reduce estate taxes (since you maintain control of the assets), they can be structured to include tax planning provisions that kick in after your death.
For instance, a living trust can be set up to split into separate trusts upon your death, potentially maximizing estate tax exemptions for married couples. It can also be designed to take advantage of generation-skipping tax exemptions and other tax-saving strategies.
The Downsides (Yes, There Are Some)
I wouldn’t be giving you the whole picture if I didn’t mention some drawbacks:
- Initial cost – Setting up a living trust typically costs more upfront than a simple will ($1,500-$3,000 vs. $300-$1,000)
- Maintenance required – You must transfer assets into the trust for it to work
- Still need a will – A “pour-over will” is recommended to catch any assets not in your trust
Do You Need Both Documents?
In most cases, yes! Even with a living trust, you should still have what’s called a “pour-over will” that:
- Catches any assets not transferred to your trust
- Names guardians for minor children (trusts can’t do this)
- Provides instructions for personal items
When a Living Trust Might Be Best For You
A living trust could be particularly beneficial if you:
- Own real estate
- Have assets over $100,000
- Value privacy
- Want to avoid probate costs
- Have minor children or beneficiaries who need protection
- Own property in multiple states
- Want control over asset distribution
Final Thoughts
While a living trust requires more upfront work and cost, the long-term benefits often outweigh these drawbacks. The probate avoidance, privacy, incapacity planning, and control features make living trusts an excellent choice for many people.
Estate planning isn’t one-size-fits-all, and what works best depends on your specific situation, assets, and goals. I always recommend consulting with an experienced estate planning attorney who can provide guidance tailored to your unique circumstances.
Have you considered a living trust for your estate plan? What questions do you still have about the process? Drop a comment below – I’d love to help clarify anything that’s still fuzzy!
Remember, proper estate planning isn’t just about what happens after you’re gone – it’s about creating peace of mind for yourself and your loved ones today. Don’t put it off any longer!
Revocable living trust vs. will: What’s the difference?
| Category | Revocable living trust | Will |
|---|---|---|
| Time and expense | Can be simple or complex, depending on the size of your estate. More complicated estates will require more attorney hours, which could add to the cost. | Simple to create and relatively easy to change. Probate is an added expense that should be considered. |
| Flexibility | You can change or amend your trust at any time, but you may need an estate attorneys help. | You can update your will at any time, but its advisable to keep track of the latest version to avoid potential will contests. |
| Establishes guardianship | No. Youll need to pair your trust with a will that includes guardianship provisions. | Yes. If you have minor children, you must create a will to stipulate guardianship should both parents pass. |
| Subject to probate | No. Assets within the trust do not have to go through probate. | Yes. Your executor will have to open probate in each state where assets are held. |
| Implementation | Effective once its established and assets are transferred. | Only upon your death. |
Should You Have a Will or Living Trust?
FAQ
What is the downside of a living trust?
Is a living trust or will better?
A standard will is appropriate for many people, and essential if you have minor dependents. A revocable living trust might be a good choice if you want to keep private financial information from the public or if you’re giving away a large or complicated estate.
What is the major disadvantage of a trust?
There are many great things about trusts, but there are also some things that could go wrong, such as losing control, having limited access to assets, costs, and keeping records…
What does a trust do that a will cannot?
A trust offers to avoid probate, which a will cannot do, allowing for a private and faster distribution of assets. Trusts can also protect your assets from creditors, help you save money on taxes, and give your beneficiaries more control and management over time, which is something a will can’t do.
What is the difference between a will and a living trust?
While a will generally gives assets outright to heirs (or might create a testamentary trust that still requires probate), a living trust lets you: Stagger inheritances: e.g., your children get half at age 25, and half at 30, rather than a lump sum at 18 or 21.
Should I use a trust instead of a will?
When planning your estate, understanding the benefits of using a trust instead of a will can make a significant difference for your loved ones. Trusts offer privacy that wills cannot, as they avoid the public probate process that exposes your assets and beneficiaries to public scrutiny.
Is a revocable living trust better than a will?
Will | Charles Schwab Revocable Living Trust vs. Will Drafting a will is simpler and less expensive, but creating a revocable living trust offers more privacy, limits the time and expense of probate, and can help protect in case of incapacity or legal challenges. December 6, 2024 • Austin Jarvis
What is a living trust & how does it work?
Living trust: Created during the grantor’s lifetime and allows assets to be transferred outside of probate, providing more privacy and quicker distribution to heirs. Trusts offer several advantages, such as bypassing probate, maintaining privacy, and providing more control over asset distribution.
Should you build your estate plan around a revocable living trust?
Building your estate plan around a revocable living trust rather than a will offers three primary benefits. First, your loved ones can avoid dealing with the headaches, delays, and expense of the probate process. They have greater leverage against creditors and can receive property quicker and easier.
What are the advantages of a trust vs a will?
While wills have traditionally been the standard document for estate planning, trusts offer several advantages that many people find compelling. Trusts allow your assets to bypass the probate process—the often lengthy and public court proceedings that wills must go through.