Will in Trust vs Living Trust: Understanding the Differences
In estate planning, the terms “will in trust” and “living trust” often come up, and many people find themselves confused about the differences between the two. Both are legal documents used to manage and distribute assets after death, but they have distinct characteristics and purposes. This article aims to clarify the differences between a will in trust and a living trust, helping individuals make informed decisions about their estate planning.
Will in Trust
A will in trust, also known as a testamentary trust, is a trust that is established through a will. It becomes effective upon the death of the testator (the person who creates the will). The primary purpose of a will in trust is to manage and distribute assets according to the instructions outlined in the will. This type of trust is beneficial for individuals who want to ensure that their assets are managed and distributed in a specific manner after their death.
One of the main advantages of a will in trust is that it allows for privacy, as the terms of the trust are not made public until the testator passes away. Additionally, a will in trust can provide protection for minor children or individuals with special needs, as the trust can be structured to provide for their care and support.
However, there are some drawbacks to consider. A will in trust must go through the probate process, which can be time-consuming and expensive. Furthermore, the terms of the will in trust cannot be changed after the testator’s death, which means that any changes in circumstances must be addressed through a new will.
Living Trust
A living trust, on the other hand, is a trust that is created during the creator’s lifetime. This type of trust allows the creator (the grantor) to transfer assets into the trust, which are then managed and distributed according to the trust’s terms. Living trusts can be revocable or irrevocable, depending on the grantor’s preferences.
One of the primary advantages of a living trust is that it avoids probate, as the assets are already held in the trust at the time of the grantor’s death. This can save time, money, and privacy concerns associated with probate. Living trusts also offer more flexibility, as the grantor can make changes to the trust’s terms during their lifetime.
Another benefit of a living trust is that it can provide for incapacity planning. If the grantor becomes incapacitated, the trust can be structured to appoint a trustee who can manage the trust’s assets on their behalf.
However, living trusts can be more complex and expensive to set up and maintain compared to wills. Additionally, the terms of a living trust are public, as the trust document is recorded in the public records.
Conclusion
In conclusion, the main difference between a will in trust and a living trust lies in their creation and effectiveness. A will in trust is established through a will and becomes effective upon the testator’s death, while a living trust is created during the grantor’s lifetime. Both have their advantages and disadvantages, and the choice between the two depends on an individual’s specific needs and circumstances. It is essential to consult with an estate planning attorney to determine which option is best suited for your estate planning goals.
