A parent in a close-knit family will never want to leave his or her children with financial trouble in the event of his or her death. Thus, some resort to drafting a will (also called last will and testament), which gives instructions regarding what should become of their property after they die. Besides determining their property’s fate, the testator, that is the person drafting the will, can also include in his/her will the identity of the person who will act as: guardian for his/her minor children; and, the executor of his/her will; the will can also leave instructions on how the (testator’s) remaining taxes and debts should be paid or it may otherwise serve as support to a living trust.
A will, however, can be subjected to a probate, which is a court proceeding that will establish its validity, determine the estate’s administrator or executor (if the will does not name one) and who can be considered as lawful heirs (if no will was ever drafted).
Thus, to do away with probate, which usually lasts for about six months to a year and eats up a certain percentage of the left estate in court and lawyer’s fees, there are those who decide to draft a living trust instead.
A living trust, which is created by a “grantor,” or the person drafting the trust, is a legal document that contains all instructions about what the he/she wishes to happen to his/her property, heirs and dependents. The property or assets mentioned in the trust are placed under the care of a trustee, who is also the grantor himself/herself (or co-trustees if the trust were created together by the grantor and his/her spouse). Unlike a will, which becomes effective only after the testator’s death, a living trust’s effectivity begins even during the grantor’s lifetime.
The US government recognizes two main types of living trusts:
Revocable living trust, wherein the grantor retains control of his/her assets that have been transferred to the ownership of the trust (since he/she is also the named trustee). As the name suggests, this type of trust may be revoked or changed by the grantor anytime he/she wishes to. Upon the grantor’s death, his/her successor trustee takes charge in the distribution of the properties identified in the document; and,
Irrevocable living trust, which is the type of trust wherein properties are irrevocably and permanently given to beneficiaries even while the grantor is still alive, rendering these same properties free from the grantor’s interest and control. Extremely wealthy couples (or single parents), who have enough savings to last through a lifetime, are usually the ones opting to create this type of trust. Though they may lose actual ownership of certain properties, these will also be removed from their total estate, thus a smaller estate tax to pay.
According to the website of Peck Ritchey, LLC, the advantages of a living trust over a will is that the former avoids probate, may eventually save the family from paying costly property taxes (despite its being more expensive to prepare compared to a will), automatically names someone who will manage the grantor’s affairs, and maintains privacy, as the distribution of properties will neither be publicly made nor recorded. But while a living trust would be perfect for some families/couples, the creation of a will would already be just right for some.
While a living trust is much more complicated to prepare than a will, a will can also end up in legal complexities that may even cause the testator to commit mistakes or easy grounds for dispute. Having a lawyer deeply knowledgeable and experienced in probate, estate, and trust matters, to help the testator in all legal aspects of the document, is essentially a necessity.