Is It Better To Have a Will or a Living Trust?

Everyone should have some form of estate plan. Estate planning helps determine what happens to your property and assets after death. This can give you peace of mind, make things easier for your loved ones, and offer tax benefits. Common estate planning tools include a last will and testament and a living trust.

Both documents allow you to name beneficiaries who will inherit your property after you die. Both documents are also flexible in that you can revise, amend, or revoke them at any time prior to death.

However, there are some key differences between wills and trusts. Estate planning and probate laws vary by state. Talk to a local estate planning attorney about what documents you need.

How Wills and Living Trusts Relate to Probate

Probate is the formal process of administering a deceased person’s estate. The probate process may occur with or without a valid will.

If there is no will, the person is said to have died “intestate,” meaning state law determines the beneficiary designation of the estate. Generally, the property goes to the closest living relative (spouse, child, parent, etc.). If you have no living heirs under the rules of intestacy, your property can go to the state.

“Sometimes what the legislature has drafted for you isn’t so bad, and who they say will handle the estate is who you would want. But sometimes that may not be who you want,” says Catherine H. Kennedy, an estate planning attorney at Turner Padget Graham & Laney in Columbia, South Carolina.

For a complex estate, probate can take several months or even years. Probate can also involve substantial costs. This can delay the distribution of property to beneficiaries, as the estate must be properly closed first.

“Everybody needs a will,” Kennedy says. “It doesn’t have to be a long one. A simple will is about seven pages long and covers what it should. Even if the will says, ‘I give everything over to my trust,’ that’s OK. You can do that. But the legislature doesn’t know you have a trust, and they don’t know that you might want to leave everything to the trust.”

If you want to avoid probate, she adds, “A living trust is a good way to do that. Some states’ probate procedures are onerous, like New York’s, and some are pretty simple. South Carolina is kind of in the middle.”

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How Wills and Living Trusts Relate to Privacy

Probate is a court-supervised process. As such, it is a matter of public record. This means anyone could walk into the probate court and get records of your will, or even a list of your probate assets.

“When I was the probate judge, occasionally I’d have people I knew just coming in and looking at files,” Kennedy says. “And I’d say, ‘Do you have some business here?’ ‘No, I’m just being nosy. My neighbor died, and I wanted to see what they owned.’”

If you value your family members’ privacy, a living trust may be a better option, as trusts are usually not public documents. Normally, only the successor trustee and the beneficiaries can see the actual trust documents.

Is a Will or a Trust Simpler To Set Up?

If your goal is to keep your estate plan as simple as possible, you may find a basic will more appealing than a living trust. Trusts are more time-consuming and require a good deal of additional work to set up.

For instance, you need to formally transfer any property — including real estate — into the trust. That said, both are relatively simple, Kennedy says. It’s more important to look at what makes the most sense for you.

“As I tell my clients, a lot of what you’re paying me for is not so much the document itself, but knowing what documents you need and what provisions need to go in those documents and giving you alternatives,” Kennedy says.

“I’ve got a friend that I’m helping right now. She’s unmarried, has no children, and she wants to leave things to a nephew whose marriage is rocky. And I said, ‘Is that really what you want to do, leave things to your nephew and then he ends up losing them in a divorce?’ And she says, ‘I hadn’t thought about that. What are my alternatives?’ Well, a trust is a good alternative. That way, they aren’t marital property to be divided in a divorce.”

Cost Savings of a Will or Trust

A living trust will make your estate plan more expensive than just a will, Kennedy notes. However, there are situations where it would be good to have — and even save you money.

“I had a client who had some property that was once rural, but car dealerships were then being built around it. The property went from relatively low-value farmland to commercial land, so its value greatly increased. So we took the real estate and put it into her revocable living trust to avoid probate fees on that value. We probably saved $3,500 to $4,000 in probate fees on that value,” she says.

Another example where a trust might be best, Kennedy says, is if you have real estate in multiple states that require a separate probate process. “So you create a living trust, put that out-of-state real estate into that living trust, and it then passes not through probate, but pursuant to the terms of the trust when you die. So you bypass probate in the other state.”

Do You Need an Estate Planner?

“What an estate planner does is teach people about the implications of what they’re doing and gives them alternatives. So that might be a living trust, that might be a will only, that might be a combination of the two,” says Kennedy. “Lots of complexities go into determining what’s best for each client, and each client is different. It’s like solving a jigsaw puzzle.”

Here are some questions you might want to ask a lawyer about your estate planning needs:

• What are your attorney’s fees and billing options?
• What is the difference between a revocable living trust vs. an irrevocable trust?
• What type of trust is best for me?
• Are there other estate planning documents I should have, such as a power of attorney, living will, healthcare directive, or special needs trust?
• Is my estate large enough to be subject to state or federal estate taxes?

An experienced estate planning attorney can help you through the legal process. They can customize the plan and legal documents for your situation. For help deciding the type of will or trust you need, talk to a local estate planning lawyer.