A Living Trust and a Will are both legal instruments used for estate planning, but they serve different purposes and have distinct features. Here are the key differences between the two:
1. Creation and validity:
- Living Trust: A living trust is created during the grantor’s (the person creating the trust) lifetime and takes effect immediately. It is a legal document that allows a grantor to place assets into a trust, with a designated trustee managing those assets for the benefit of one or more beneficiaries.
- Will: A will is a legal document that outlines how an individual’s property and assets will be distributed upon their death. It only becomes effective after the testator’s (the person creating the will) death.
- Living Trust: Assets placed in a living trust avoid probate, which is the legal process of validating a will and distributing the deceased’s assets. This can save time and reduce costs associated with the probate process.
- Will: A will must go through probate, which can be time-consuming and expensive. The probate process also makes the details of the will a matter of public record.
- Living Trust: Living trusts offer greater privacy because they do not become public records. The terms of the trust and the distribution of assets remain confidential.
- Will: Wills become public records during the probate process, and as a result, the distribution of assets and other terms of the will can be accessed by anyone.
4. Management during incapacity:
- Living Trust: A living trust can provide for the management of the grantor’s assets during their lifetime, even if they become incapacitated. The trustee can continue to manage the trust assets for the benefit of the grantor and beneficiaries without the need for court intervention.
- Will: A will does not provide any provisions for managing the testator’s assets during their lifetime or in the event of their incapacity. In such cases, a court-appointed guardian may need to be assigned to manage the incapacitated individual’s affairs.
5. Flexibility and modification:
- Living Trust: A revocable living trust can be amended or revoked by the grantor during their lifetime, allowing for flexibility in managing and distributing assets. Irrevocable trusts, however, cannot be changed or revoked without the consent of the beneficiaries and/or a court order.
- Will: A will can be changed or revoked by the testator during their lifetime, as long as they are mentally competent.
One key aspect of a Living Trust, is that it can act as a Will for assets that cannot be titled in the Trust’s name. One of the primary advantages of a Living Trust is its ability to hold and manage a wide range of assets, including real estate, investments, bank accounts, and personal property. However, there may be certain assets that cannot be titled in the Trust’s name, such as retirement accounts, life insurance policies, and certain government benefits.
Due to all the reasons above, we recommend creating Digital Living Trust.