Living Trust Vs. Will

Aparna Iyer Jan 27, 2019
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The given information aims at exploring the advantages of drafting a living trust which is a feasible alternative to a will.
A will is a legal document that states in no uncertain terms the wishes of the testator/testatrix as regards the distribution of assets. Wills may be holographic, oral, or testamentary.
A will that is created as a formal document and signed in the presence of witnesses is known as a testamentary will or a self-proving will. Such a document is widely recognized from a legal perspective, and is preferred to a holographic or an oral will.
A trust is created by an individual or an organization, to grant fiduciary control to the trustee, who is held responsible for managing assets on behalf of the beneficiaries. The creator of the trust is known as the grantor, the settlor, or the donor.
A trust fund, which refers to the assets that are held in trust, may be created for a wide variety of reasons that may range from the desire to avert a costly probate process to avoid paying hefty taxes.
Sometimes, people may set up a trust for the sake of peace of mind. A trust can be set up as a Living Trust, an After Death Trust, a Blind Trust, a Specific-Use Trust, a Revocable Trust or an Irrevocable Trust.
A living trust is often considered an alternative to a will, since the former has the effect of ensuring the management of assets both before and after the death of a person, while the latter comes into force after the death of the testator/testatrix. It is established by a donor while he/she is still alive.
Although the grantor can be designated as the trustee, it would be prudent to name a successor to ensure that in the event of the settlor's demise, the management of the assets is automatically passed on to the trustee. It can be revocable or irrevocable.

Distinction between Living Trust and Will

Revocable Living Trust Vs. Will

Establishing a revocable living trust will result in the management and the distribution of the property by a trustee who is provided detailed instructions on how the property is to be eventually distributed. Such a trust can be modified or terminated by the grantor at will without the consent of the beneficiary.
A revocable living trust is created as an alternative to a will, as the former is not subject to probate. A will, on the other hand, results in a lengthy probate process involving the inventory and appraisal of the property, settling the claims of creditors by repaying debts and taxes, and distributing the remaining property as per the terms of the will.
A living trust allows surviving family members to transfer the grantor's property without a time-consuming and costly probate. Thus, inheritance becomes painless.
Another benefit is that it is not a public document. A living will, on the other hand, becomes public record once it is filed with the clerk of the court of the county where the decedent resided. The filing of the will has to be undertaken by the custodian of the will, within 10 days of receiving information about the testator's demise.
Tax savings are the same in case of wills and living trusts unless one decides to create an irrevocable living trust known as a marital bypass trust.

Irrevocable Living Trust vs. Will

A marital bypass trust is an irrevocable living trust that can help people avoid probate, maintain their privacy, and save on Federal estate taxes. Each spouse leaves his/her share of the property to an irrevocable trust ensuring that the property is used to benefit the surviving spouse.
Moreover, the couple name beneficiaries who would be entitled to the property after the demise of the surviving spouse. Since the surviving spouse does not own the property, the beneficiaries are not expected to pay taxes on inheriting the property after the demise of the former.
Sometimes, people create a living will, which is different from a testamentary will. A living will does not deal with distribution of assets, but has the effect of communicating to the physician the wishes of the testator with respect to receiving medical care in the event of the latter being incapacitated on account of accidents or a debilitating illness.
This definition is self-explanatory when it comes to understanding the difference between living will and trust.