When to Use Last Wills Vs. Living Trusts?

By A.L. Kennedy

A last will and a living trust are two methods of estate planning. Both provide a way to leave property to certain people or charities when you die. A living trust and a last will may be used separately or combined in your overall estate plan. Knowing when to use last wills and living trusts can help you create an estate plan that's right for you.

Last Wills and Living Trusts

Your will distributes your estate after your death, and so does a living trust. The primary difference is that your will goes through probate, a formal legal process of carrying out the instructions you've put in the document. Your living trust, on the other hand, does not go through probate; instead, the trustee distributes your property from the trust according to the rules you create for the trust. Your will is sometimes called a "last will" to distinguish it from a "living will," which deals with decisions after you become incapacitated. A "living trust" is simply a trust you create while you are still alive.

When to Use a Last Will

A will does more than merely tell those who survive you how to distribute your property. It also gives you the chance to choose who will be responsible for the life you leave behind, from who will pay your bills to who will raise your children. You make these decisions in your will by naming certain people to be your executor or personal representative and to be the guardian of your children, respectively. If you do not leave these instructions in a will, the probate court will choose an executor and a guardian on your behalf.

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When to Use a Living Trust

A living trust allows you to avoid or shorten the probate process by passing some or all of your property to your chosen beneficiaries without sending that property through the probate court first. A living trust consists of the grantor, or person who created and funds the trust; a trustee, who manages the trust; and one or more beneficiaries, who receive the income, principal or other property from the trust. In addition to avoiding probate, you can also use a living trust to set up a steady income for minor children or a relative with disabilities. It is also much easier to change the beneficiaries of a living trust than to change the beneficiaries of a will, according to FindLaw.

When to Combine a Last Will and a Living Trust

You may include both a last will and a living trust in your estate plan. In two major situations, the combination may provide great benefits. First, a last will can contain nothing but a "pour-over" clause stating that any property you have that is not already in the living trust when you die transfers to the trust on your death. The pour-over will allows you to keep your assets in your name while you live, but transfer them to the trust to avoid probate when you die. The second situation is if you have minor children for whom you would like to provide a steady income. In this case, your last will can name your children's guardian, while the trust can be set up to give your children the interest income from the assets the trust holds without allowing them to squander the principal, according to the American Bar Association.

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Iowa Living Trust Vs. Last Will
 

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California Living Trust Vs. Last Will

California law allows residents to use a living trust, a last will or both in their estate plans. Deciding whether to choose a California living trust or a last will is easier when you know what each document can do for you. You may also wish to consult a California estate lawyer for more information.

How to Create a Revocable Trust

A revocable living trust allows you to provide for the distribution of your property after your death. When you set up a trust, you help your heirs and family avoid the probate courts, which must review and authorize any will. “Revocable” means that you can change the trust at any time, or cancel it altogether. Creating a trust is a straightforward matter of preparing and signing a document, which contains certain provisions and conforms to the law.

Can a Husband Claim Rights to Your Trust Fund in Divorce?

A trust fund is a legal entity created by the grantor for the financial benefit of another person, the beneficiary. The grantor funds the trust by placing assets in the trust's name. He also names a trustee who is responsible for overseeing the trust and distributing trust assets to the beneficiary according to the trust's terms. Generally, a spouse cannot claim rights to your trust fund in a divorce, but courts in some states have awarded trust fund assets to the non-beneficiary spouse under certain circumstances.

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