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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How to Use a Trust for Asset Protection

As with other testamentary instruments, such as a will, trusts give clear directions on how to distribute property upon the happening of a specified event, for example, death. Trusts can also protect assets from creditors, depending on the type of trust you use. This occurs because property held in a trust is considered property of the trust. In other words, once you place property in the trust it is no longer yours; it belongs to the trust. Some limitations exist, however. For example, few states allow trusts for the sole purpose of asset protection. A basic understanding of trusts can help you determine the best type of trust to use in order to protect your assets.

The Different Types of Revocable Living Trusts

You can usually create a trust to match your personal needs and concerns. All fall into one of three categories, but within these categories, a great deal of variety exists. Trusts are either living or testamentary. Living trusts are created during your lifetime, not by the terms of your will after your death. Living trusts can be either revocable or irrevocable.

Ideas for a Senior's Last Will & Testament

Many people choose not to write their wills until they are well into adulthood. Seniors who are writing a will often have different concerns than they had as young adults. When planning your will as a senior, it's a good idea to keep certain points in mind to ensure that all your bases are covered. Consulting an attorney who practices estate law in your state can also help you ensure your will is valid and does what you want it to do.

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