While both a will and a living trust are legal instruments that allow an individual to assign beneficiaries to his/her properties, each has different uses and characteristics. Knowing these differences can help determine which will better suit any situation.
A will is a legal document that expresses an individual’s (called a testator) instructions about how his/her property and assets are to be distributed upon death. The testator appoints one or more persons to handle the estate (i.e. administrator, executor) until its final distribution to the beneficiaries of the will. Wills are also known as testaments, and these terms are often used interchangeably. A will covers both real property and personal property.
A person of legal age and of sound mind can create a will with or without legal assistance from a lawyer. There are a number of requirements to make a will valid. While legal requirements vary depending on the jurisdiction, general requirements may be applied. For example, it must be clear that the testator is creating a will. In addition, the testator’s identity and the beneficiaries must fully established in the will.
A will can be revoked should the testator deliberately tear or burn the actual document. Partial revocation is allowed in most jurisdictions if only a portion or a certain provision is crossed out. If the testator creates a new will, the older will is revoked. A probate court may be brought in after the testator passes on to determine a will’s validity. In the event that the will is found invalid, the inheritance process will take place as if no will was ever drafted.
A living trust is a legal instrument established during an individual’s life that allows the transfer of assets while bypassing probate courts. The person who creates and initially funds the trust is called the grantor. A trustee is appointed by the grantor to hold legal possession of the trust property or assets on behalf of the beneficiary. Also known as an “inter vivos trust,” the duration of a living trust is established by the grantor during the creation of the trust. The assets are distributed as instructed by the grantor. This distribution may happen during his lifetime or after his death. A testamentary trust, on the other hand, is a trust that becomes effective upon the death of the grantor.
One of the main benefits of setting up a living trust is that the long and costly process of probate can be avoided. This also means that private financial matters of the family will be kept confidential. A grantor can also be assured that the property will be managed according to his wishes in the event of mental incapacity or even after death. A well-funded, properly executed living trust will help make sure the assets are received by the beneficiary as stated in the trust.
Will vs Living Trust
So what’s the difference between a will and a living trust? Setting up a living trust instead of a will can be more appealing. However, a living trust can be more complicated to create as more will need to be addressed.
If you have a pen and paper, you can draw up a will right there and then. The shortest legal wills ever created had only two words. The creation of a will does not require the presence of a lawyer. In contrast, a living trust must be clear, concise, and meets certain legal requirements to be considered valid. A will takes effect upon the death of the testator, while a living trust can be in effect during its grantor’s lifetime or death. Distribution of property is the main goal of a will, while a living trust involves the legal transfer, management, and distribution of the property.
|Distribution of property||Transfer, management, and distribution of property|
|Simple and inexpensive to create||Complicated and may cost more|
|Effective upon testator’s passing||Effective throughout lifetime and death of grantor|
|Does not require funding||Requires trust to be funded|
Check out this YouTube video for more about wills and living trusts.