Wills and Revocable Trusts: Know the Differences
Understanding the difference between a will and a revocable trust is key to choosing the right estate planning tool for your needs.
Wills and revocable trusts are beneficial planning documents used to pass someone’s property and assets to beneficiaries after the owner’s death. However, there are very distinct differences between a will and a trust.
To make the best decision for your family, you should know the three major distinctions between wills and revocable trusts.
When a will is administered, it must go through the court system and becomes a matter of public record. Anyone could gain access to the court record and possibly see the names associated with the case.
When a trust is administered, privacy is protected because all transactions are administered through the trustee rather than through court. A trustee’s records remain private.
Why is privacy important? Some distant relative may see the court record and then file a challenge or scammers could reach out to heirs knowing they are about to receive an inheritance.
Probate is the legal process by which the court system determines if your assets are properly distributed upon death. Your assets will go through probate, even if you have a will that outlines where you want your property to go.
The court decides if your will is legally valid, and then the executor also called personal representative appointed is authorized to administer your estate. The objective of the court is to ensure your taxes and debts are paid out of your estate before any distribution is made to the beneficiaries as outlined in your will.
The most well-known advantage of a revocable trust is avoiding probate. Any assets properly held in the trust or transferred upon death to the trust will avoid probate and pass to the named beneficiaries as set out in the terms of the trust.
A will allows you to transfer assets upon death. But you have no control over how those assets are managed after your death. The probate court will assess that.
In contrast, revocable trusts are flexible and can contain unique distributions to beneficiaries. For example, you can hold money in a trust to be distributed over time. Some families prefer to have their adult beneficiaries receive only a portion of their inheritance at one time and wait to receive the remaining amounts at later dates.
Although a revocable trust may be considered the principal document in an estate plan, a will should accompany a revocable living trust. This type of will, referred to as a “pour-over” will, names the revocable living trust as the principal beneficiary.
Thus, in the event it becomes necessary to probate any assets after your death (for example, if something was not properly transferred to the trust), it would ultimately go back into the trust and still be distributed to (or held for the benefit of) the beneficiaries according to the trust instructions. A pour-over will would offer additional protection as a backup plan in the event something slips through the cracks and that one asset must end up going through probate.
Revocable living trusts are complicated legal arrangements that require considerable knowledge and expertise. They must be the product of a thorough analysis of your goals and your personal and financial circumstances.
At Assertion Law Firm LLC and 417 Business & Elder Law, we can help you understand your legal options and advise you along the path to a sound estate plan. We will work with you and help you achieve peace of mind, knowing your estate is protected. You may never see the results of the planning that you do, but your loved ones will!
Consider consulting an estate planning attorney to create your will to ensure all of your assets are distributed per your wishes. Call us at (888) 887-4170 to schedule a consultation.
Understanding the difference between a will and a revocable trust is key to choosing the right estate planning tool for your needs.
