Will or Living Trust: Which Is Right for You?

For many of us, the legacy we leave behind is important. We want to leave our loved ones with a rich history of fond memories and shared stories, while also making sure they are cared for financially when we are no longer around. But how we distribute these resources to our heirs is just as important as the resources we leave to them. Making sure that the right estate planning structures are in place to pass on your assets and valued possessions with minimal complications and expense may be one of your last great acts of care. To help you consider what approach might be right for your situation, we’ll review two of the most commonly used instruments in estate planning: a last will and testament and a living trust.

Both documents provide instructions for what happens to your assets after death, but each has a different purpose, structure, and functionality. A last will and testament will only take effect after your passing and appoints an executor (or personal representative) to carry out the settlement of your estate. A living trust, on the other hand, goes into effect during one’s lifetime and is a legal arrangement made by the grantor who designates a trustee (sometimes the same person); the trustee serves to protect the grantor’s assets during their lifetime and distribute them after their death.

It should be noted that a will and living trust are not mutually exclusive; not everyone who has a will needs a trust, but generally everyone, including those with trusts, should also have a will. There are some things that a trust may not cover, such as assigned guardianship of children.

Here are some of the key differences between the two structures:

Creation and Cost

When it comes to the formation of a will versus a living trust, creating a will is typically much simpler. A will document is drafted, signed by the individual and witnesses, and in some states notarized. This can be done relatively quickly and inexpensively, particularly if one’s estate is uncomplicated in terms of assets and beneficiaries. Creating a living trust, however, is usually a bit more complex and involves hiring an estate attorney, transferring assets into the trust, retitling accounts, and assigning a trustee. There may also be additional maintenance over the life of the trust. The initial starting cost is likely to be more expensive than a will, with further ongoing expenses to keep it up to date over your lifetime. Wills make sense for those who need something in place quickly and affordably, whereas a more complicated estate may justify the increased cost and time involved in setting up a living trust.

Probate and Privacy

The largest advantage to a living trust is its ability to streamline the disbursement of assets after your passing. A will can be challenged in court and will go through probate after your death, which can be a lengthy process for your survivors. A living trust avoids probate and transfers assets directly to your beneficiaries.

A trust also has the advantage of keeping the details of your estate private. Because a will is processed through the court, the information contained is public. For those wishing to keep a family business in the family or those who feel discretion is essential to harmony of the heirs, a trust might be a better fit.

Complexity and Location

Depending on the state in which you live, and in which your property is titled, establishing a trust may make a tremendous difference to your heirs. Some states, like Washington, have a streamlined probate process in place which can be fairly easy to navigate. Other states, such as California, have a more complex system that takes longer and can be more burdensome. If you own property in several states, it would require heirs to navigate the probate system in multiple places. The benefits of a trust are important to consider if you have a particularly complex estate you are leaving behind, own a business, or have other considerable assets.

In deciding whether to execute solely a last will and testament versus also setting up a living trust, it’s crucial to consider not only the immediate needs of your estate but also the long-term implications for your loved ones. Both instruments offer distinct advantages and differentiating characteristics; what you choose to incorporate into your estate plan will depend on your specific circumstances and priorities. Your Coldstream team is ready to help identify the best estate planning structure for you and your loved ones, and to work in conjunction with your estate planning attorney to implement your plan.