Living trusts and wills are both effective in distributing an inheritance.
In times past, ancient pharaohs and other royalty were buried with portions of their wealth.
This is no longer a common practice.
Nowadays, people generally believe you cannot take your stuff with you when you die.
As one old saw holds, “You will never see a hearse pulling a U-Haul trailer.”
According to a recent The Motley Fool article titled “Living Trust vs. Will: Which Is The Best Way to Pass Inheritance to Your Family?“ inheritances must be conferred through legal documents.
As the title of the article notes, two estate planning documents commonly used to perform this function are revocable living trusts (RLTs) and last wills.
With two viable options available, choosing a RLT-based or will-based estate plan depends on your goals and circumstances.
Which of these options involves the probate court?
A last will provides directions to your executor regarding how to administer your estate under the supervision of the local probate judge.
With a RLT, administration responsibilities fall on the trustee without such supervision.
When do these options take effect?
A last will only has legal life when you die, and the last will is admitted to (and accepted by) probate.
On the other hand, a RLT is used to transfer, use, and manage assets while you are alive and after your death.
With a RLT, the initial trustee is often the same individual who makes the trust.
Successor trustees are those who take on management duties after the incapacity or death of the original trustee.
Unlike a last will, a RLT allows for greater protections and safeguards against inheritance mismanagement by heirs.
While a RLT becomes effective immediately upon creation and funding, a last will only has authority after the willmaker has died and the probate court judge reviews and approves its validity.
It is common for people to utilize both documents in their estate planning.
A last will can do more than direct the distribution of assets.
For example, in most states, a last will is used to nominate guardians for minor children.
Consequently, those who have young children should not neglect this critical estate planning document!
Those who value financial privacy may choose a RLT-based estate plan because a last will becomes a public record once filed with the court.
Curious individuals can request and read your last will.
That is how we know so much about celebrity estates.
Privacy is a hallmark of RLT-based estate plans because these documents do not have to be filed with any court in most states.
Only the trustee and beneficiaries know the exact terms of the RLT.
Distribution of assets is quicker through a RLT because they can be distributed directly to beneficiaries without any involvement by a court.
I should note that trusts can be created as either revocable or irrevocable.
With a revocable trust (i.e., RLT), the grantor can make changes or terminate a trust after its creation.
With an irrevocable trust, the entity and its components cannot be changed except in limited circumstances.
In some states, it is possible for one trust to pour assets into another trust.
Whether you plan with a RLT-based or will-based plan, you should work with an experienced estate planning attorney to ensure your planning aligns with your goals and that your documents are valid and will be effective.
Reference: The Motley Fool (July 7, 2023) “Living Trust vs. Will: Which Is The Best Way to Pass Inheritance to Your Family?“