Advantages & Disadvantages of a Last Will Vs. a Living Trust

By Carrie Ferland

When you pass away, you leave behind an estate composed of your real property, personal property and other assets. Unless you leave instructions defining how these assets should be divided and amongst whom, the state decides which of your relatives will inherit your property. You probably don’t like the idea of leaving your estate up to chance, but choosing the right plan for your estate is confusing. Understanding the difference between a will and a living trust and comparing the benefits and drawbacks of both options can help you make a better, more informed decision and establish the estate plan that works best for your personal needs.

When you pass away, you leave behind an estate composed of your real property, personal property and other assets. Unless you leave instructions defining how these assets should be divided and amongst whom, the state decides which of your relatives will inherit your property. You probably don’t like the idea of leaving your estate up to chance, but choosing the right plan for your estate is confusing. Understanding the difference between a will and a living trust and comparing the benefits and drawbacks of both options can help you make a better, more informed decision and establish the estate plan that works best for your personal needs.

Advantages of Last Will

A last will is the most basic way to plan an estate. A will is very simple to establish, and a testator can draft his own will with little to no up-front costs. Wills offer a lot of flexibility for a testator who has a spouse, minor children or others for whom he wants to provide support after his death. Same-sex partners and unmarried couples can also use a will to grant rights and provide financial support to their loved one where state law normally would not. In this regard, a will allows the testator to plan for more personal matters, such as funeral arrangements, how his children should be raised, care for his surviving pets or anything else the testator could need.

Protect your loved ones. Start My Estate Plan

Advantages of a Living Trust

A living trust offers many of the same benefits as a will, but allows the testator to protect her financial privacy by completely avoiding probate. While a will becomes a part of public record during probate, only the beneficiaries of a living trust know how much revenue the trust generates, and only the trustee knows the full extend of the trust’s assets. Living trusts offer more control over the estate’s assets, allowing the testator to form a living trust to better handle her assets, investments and interests, control her business interests and manage her real property during her life, and then pass this authority onto a new trustee after her passing. Living trusts also avoid traditional estate taxes, saving more money for the decedent’s beneficiaries. Moreover, the decedent can establish a living trust during her lifetime, allowing her to take advantage of these same tax breaks while still alive.

Disadvantages of Last Will

In exchange for the flexibility a last will offers, the testator’s estate incurs federal estate tax liability. The testator’s beneficiaries also face income taxes and inheritance taxes, depending on their residential state’s laws, while the inheritance received from a living trust is usually only subject to income taxes and only on income received for the fiscal year. While probate does extend protection against fraud, embezzlement and mismanagement of estate assets, the testator’s will becomes public record once filed. This allows the public to access and review the testator’s will during and after probate. Probate also opens the possibility for challenges against the validity of the will or the testator’s capacity, which possibly can overturn the will and potentially subject the entire estate to intestacy probate.

Disadvantages of a Living Trust

Compared to a will, a living trust is very limited in application. Living trusts can manage and pass on real property, but the decedent cannot arrange care for minor children, grant rights to her unmarried partner, plan her funeral or make other arrangements. Without a will, a living trust leaves the majority of the testator’s personal matters for intestacy probate. Additionally, living trusts cost substantially more to establish because the testator must fund the trust at the time she forms it. Further, while a living trust allows the estate to avoid probate entirely, the court has no way to monitor the estate for potential fraud or abuse and far less opportunity to catch administrators who misappropriate the estate’s assets.

Protect your loved ones. Start My Estate Plan
Last Wills Versus Trusts

References

Related articles

What Is Better: a Living Trust, or Last Will?

Estate planning affords you the opportunity to ensure your money continues to sustain your family’s needs after your passing. Unfortunately, estate planning is perplexing for many, and making one wrong choice can mean the difference between financial security and economic disaster for your loved ones. Understanding your options and smart planning can help to ensure that your money supports your family long after your departure.

Revocable Living Trust & Real Estate Joint Tenancy in Maryland

Joint tenancy allows multiple owners to hold property at once and even allows that ownership to survive the death of one of the owners. A revocable living trust is a legal structure in which an owner surrenders control of his property to another person to manage for the benefit of a third party. In Maryland, both joint tenancies and revocable living trusts may offer distinct estate planning advantages in terms of avoiding probate.

Do I Have to File a Will Through Probate?

Probate is a court-supervised administration of a will. Although not every estate passes by will, every will passes through probate in order to become effective. The executor -- either named in the will or appointed by the court -- steers the will into and through the probate process, collecting assets, notifying heirs, paying debts and ultimately distributing property.

LegalZoom. Legal help is here. Start Here. Wills. Trusts. Attorney help.

Related articles

Living Trusts vs. Last Wills

Planning your estate is the key to ensuring that your loved ones are provided for after your passing. However, the cost ...

The Advantages and Disadvantages of a Living Trust or Last Will in Florida

Estate planning involves taking steps to protect your assets for your family’s benefit. It allows you to manage ...

What Is the Meaning of Last Will & Testament?

A last will and testament is a legal document that conveys the final wishes of a decedent for the administration and ...

What Is The Difference Between a Living Trust and a Last Will in North Carolina

There are two types of legal instruments commonly used for individuals to set the terms of the distribution of their ...

Browse by category
Ready to Begin? GET STARTED