Should I have a Living Will or a Trust?

If you’re starting to think about estate planning, you’ve probably come across two common methods of passing wealth and belongings to someone else — trusts and wills. However, there are big differences between these two documents, especially when it comes to when and how your assets are distributed.

It’s worth noting that the laws regarding trusts and wills vary by state, so you should consult an estate planning attorney or expert in your state on the specifics. That said, both trusts and wills have some features that remain the same no matter where you live. We break down the main differences between these two legal tools, including who they’re for, how they function, and the types available.

What is a will?
A will is a legal document you create that details how you want your assets and belongings to be distributed after you die. Wills can cover everything from who inherits your baseball card collection to who takes ownership of your house.

Generally, wills include:

An executor: This is the person who’s in charge of carrying out the will
Beneficiaries: The people you’re naming to inherit items or money.
Guardians for children: If applicable, you’ll name guardians for minor children.

In probate, the court grants someone permission to act for the estate.  In essence, the probate process is how the legal system validates your will and gives the go-ahead to the executor to begin distributing your assets.

Note that there’s a difference between a will (also called a last will and testament) and a living will. While a will directs the distribution of your financial and material possessions, a living will provides instructions for medical treatment if you’re unable to communicate your wishes. While both are legal documents, living wills are focused on your care rather than your finances and possessions. You can have both a last will and testament and a living will — and in many cases, having both is important.

What is a living trust?
A living trust is another estate planning tool that can be used to transfer property and wealth to others. While a will names who things would go to, a trust takes it one step further.

There are two types of living trusts: revocable trusts which can be changed during a person’s lifetime, and irrevocable trusts, which are often permanent but can come with tax advantages.

If you’re deciding between a will and a trust, there are some notable pros and cons you’ll want to be aware of as you start the process.

Having a will can direct those you care about in an already difficult time, and make sure that your belongings and assets are distributed how you’d like. In the case of a living will, it can also direct your care if you’re unable to communicate those wishes.

While there are default laws on who receives what after you die, they vary by state and may not align with your family situation or wishes. Whatever your financial situation, you can benefit from having directions laid out just in case.

While creating a living trust will often require involvement from a legal professional, several services allow you to create estate planning documents with Thav, Ryke and Associates.