Wills and Trusts – Which one do I use?

          There is often much confusion about the differences between a Living Trust and a Will. While both documents are used to transfer property upon the death of the owner of that property, the manner in which they work is actually quite different.
          A will is used to give instructions to a probate court regarding how a decedent ‘s (dead person’s) property is to be gifted out on their death. Generally, for a will to have full legal effect it must be processed by a court through a probate estate proceeding. Such a proceeding takes time, at least 8 to 12 months, and sometimes considerably longer depending on the facts and circumstances. This may involve some court supervision of the personal representative (executor) and often entails considerable attorney fees and administrative expenses. The will becomes a public document, as do all of the affairs of the estate.
          A living trust is a document that operates outside of probate. The person who creates the trust places their property with a trustee during their lifetime, or through executing a transfer-on-death document that also avoids probate, and the property is managed and distributed in accordance with the terms of the trust agreement. The trust agreement is essentially a private document which does not require any court involvement. While there are administrative expenses and an attorney may be retained if necessary, Trusts typically involve less expense while they are in operation (after the death of the owner) than a will requires. It is very important to follow through and actually transfer property you want to place into a trust over to the trustee.
          Trusts have added benefits in that they can avoid lump sum distributions to financially irresponsible beneficiaries, protect against divorce situations with ex-spouses of beneficiaries, and help manage post-death IRA and 401(k) distributions.
          Wills should be a part of an estate plan. In the event that a decedent has left property that is not in a trust, the will is a backstop measure to assure that there is some instruction on how that property is to pass to others. The will can even leave any such property to a living trust (called a pour over will). A Parent can also name a guardian for their minor child in a will. In situations with small estates (no more than $100,000 in real estate and $75,000 in personal property and money) a person named in a will who is not a natural immediate heir (i.e. a friend) can utilize an abbreviated method of probate and bypass court involvement to have property distributed much sooner.
          We recommend that both wills and trusts be included in an effective estate plan in order to avoid probate, and to effectively manage and distribute property after the death of the owner.