Living Trust vs Will: What’s the Difference?December 30, 2020
Estate Planning is not a common topic discussed around the dinner table or even one that people like to talk about. However, having these conversations can help protect your loved ones and provide a record of your final wishes. Both a Will and a Living Trust are essential pieces of Estate Planning and offer different advantages.
The biggest differences between a Living Trust vs Will are their contents and when they apply in your life. To help you understand which option may be best for you and assist with your Estate Planning, it is always important to contact an experienced estate planning attorney to fully explain your options.
What is a Will and Why Do You Need One?
A Will is a legal document that outlines what your wishes are after your death. In your Will, you can list your important keepsakes and specifically name who you would like them to be passed along to after you die. The people you name in your Will are called beneficiaries.
Another important element that can be included in your will are the details of your funeral. Adding these specifics to your Will alleviates the burden on your loved ones. Detailing specific funeral wishes in your Will ensures that your loved ones are not in a position to make difficult decisions without knowing what you truly wanted.
If you have minor children, a Will is a MUST! Within your Will, you will designate who you wish to be the guardian(s) for your children. If you do not have a Will that addresses legal guardianship of your minor children and both parents die, the court system will make the decisions about your children’s care regardless of what your wishes may have been.
In Pennsylvania, if you die without a Will, your estate falls under intestacy law. PA’s Intestacy Laws will essentially establish a Will for you and split your assets among your closest relatives, such as your children, using a formula set forth in the law.
What is a Living Trust and Why Do You Need One?
Unlike a will, a Living Trust takes effect while you are still alive. During this time, you can manage your Trust and are in charge of it. There are different kinds of Trusts, but one of the most common is a Revocable Living Trust. This type of Trust can be changed or updated as details in your life change. Once the Trust is created, you are then able to move ownership of your major assets, like your home, into your Trust. While you are still living you can appoint yourself as the trustee, so that you are able to manage all of the details and continue to use the assets that are listed within your Trust.
You may also outline in your Trust who is the person you wish to appoint as your successor trustee. In the event that you become incapacitated or die, the named successor trustee will be able to take over the Trust and appropriately manage your assets based on your wishes. Naming a successor trustee allows the named person to step in immediately without needing to seek any approval from the courts.
One of the benefits of having a Living Trust is the ability to avoid a process called probate after your death. Probate Law is when the Will is required to go through a court process before any assets are distributed. In some situations, the probate process can be both time-consuming and costly. Ensuring all your property and large assets are under the ownership of the Trust will allow the named successor trustee to take over and avoid the probate process.
A Living Trust does not avoid the payment of either Federal Estate Tax or Pennsylvania Inheritance Tax.
Are There Other Types of Trusts You Might Need?
Another commonly used type of trust is called a Testamentary Trust. A Testamentary Trust is established in your Will. These are often used for assets that will pass to minor children or others who need asset management or creditor protection.
Special trusts are used when a beneficiary has a disability and is or may be eligible to receive federal or state benefits such as SSI or Medicaid/Medical Assistance. Referred to a Supplemental Needs Trusts or Special Needs Trusts, they protect eligibility for benefits while providing funds for needs not covered by the pubic benefits.
Understanding the details of a Living Trust vs Will can be difficult to navigate on your own. Trusting an experienced estate planning attorney near Harrisburg, PA to help with these important life decisions can help take some of the stress out of the planning. The team at DaleyZucker is experienced, compassionate and prepared to help you navigate the estate planning process.