A Comparison of a Living Trust to a Last Will

By Christine Funk, J.D.

A Comparison of a Living Trust to a Last Will

By Christine Funk, J.D.

Most people understand that both living trusts and last wills and testaments dictate what happens to a person's property after her death. However, there are important differences between these estate planning tools. Neither a living trust nor last will and testament is "better" or "worse" than the other. Rather, one person's situation is better suited for a living trust, while another's is better suited to a last will and testament. Understanding the different goals that are achieved with each is essential to determining which is best for a given individual.

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A Living Trust

When a person creates a living trust, she transfers her assets into the ownership of the trust. A living trust may be revocable or irrevocable. It is important to first understand some basic terms for a trust:

  • Grantor: person who creates the trust and is the owner of the property placed in a trust
  • Trustee: person in charge of managing the assets of the trust
  • Beneficiary: individual for whose benefit the trust was created and the assets are managed

Because living trusts are effective during life, the individual creating the trust usually acts in all three roles at once—the grantor, the trustee, and the beneficiary—until her death. While the grantor is alive, assets may move freely in and out of the trust, if it is a revocable trust.

Upon the death of the grantor, some or all of the living trust becomes an irrevocable trust. Assets may no longer be freely transferred in and out of the trust. Based on the terms of the trust, the assets may be managed for the benefit of the beneficiary (if, for example, the beneficiary is underage) or transferred directly to the beneficiary by the trustee. Transfers are based on the terms of the trust and are made without the supervision of a court. The terms of the trust and property held in the trust are private.

A Last Will and Testament

A will is different than a trust in that a will designates beneficiaries for an individual's assets upon the person's death. These assets must go through probate, which is the legal settlement of your estate. Probate is a public court process. As with any court proceeding, it requires an attorney and filing fees, which may become very expensive.

You may revoke a will by writing another will and specifically declaring in the document that you revoke all your other wills.

Deciding Which Approach Is Right for You

Deciding which approach is right for you is a personal decision. As a general rule, people with assets may prefer a living trust to a will. This allows for the assets to be transferred more quickly and more privately than with a will. With a living trust, the assets are placed into the living trust, and, upon the death of the individual creating the trust, the assets transfer to their beneficiaries without public record.

Because wills are probated, a public record is made of the assets a person had prior to their death and to whom the assets were given. An executor, identified in the will, must file probate, make an inventory of all assets, and determine the value of these assets. Next, the executor distributes the assets. Estate taxes are assessed based on the value of the inheritance.

While a living trust costs more money up front, the attorney's fees for probate can well exceed the cost of setting up a living trust. Executors are also usually compensated for their efforts, which adds to the expense of probate.

Finally, even those with a living trust may decide to execute a pour-over will. This type of will declares that any property not currently in the trust at the time of death is left to the trust. This protects property, for example, acquired after the trust was created but before the person had the chance to include that property in the trust.

Be sure to consult a licensed estate planning attorney for more information about your state's specific requirements for a living trust and a last will and testament.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.