What is the difference between a will and a living trust?

A will and a living trust are two types of estate planning tools that are commonly used to transfer assets from one generation to the next. However, there are some key differences between the two that are important to understand.

A will is a legal document that explains how a person's assets should be distributed after they die. It can be used to distribute assets to family members, friends, or charities. A will also provides the opportunity to name an executor who will be responsible for carrying out the terms of the will. A will goes into effect only after the person who created it dies.

On the other hand, a living trust is a legal document that allows a person to transfer ownership of their assets into a trust while they are still alive. The trust is managed by a trustee, and the assets in the trust can be distributed to beneficiaries as specified in the trust document. The person who creates the trust can also serve as the trustee, allowing them to maintain control over their assets even after they transfer ownership into the trust. A living trust goes into effect immediately after it is created.

One of the main benefits of a living trust is that it can help to avoid the probate process, which can be expensive and time-consuming. When assets are transferred into a trust, they are no longer considered part of the individual's estate, and therefore do not have to go through probate after the person dies. This can save time and money, and also provide greater privacy, as probate proceedings are a matter of public record.

Another benefit of a living trust is that it can provide greater flexibility in how assets are distributed after a person dies. For example, a trust can be created to provide for the long-term care of a disabled family member, or to provide for the education of grandchildren. This can be especially beneficial for families with complex estate planning needs.

In contrast, a will is a more straightforward document that simply outlines how assets should be distributed after a person dies. It does not provide the same level of control or flexibility as a living trust.

It is important to note that both wills and living trusts have their limitations, and it is often advisable to use both documents in conjunction with each other. For example, a will can be used to distribute assets that were not transferred into a living trust, or to name guardians for minor children. In addition, certain types of assets, such as retirement accounts or life insurance policies, may be better suited for a beneficiary designation rather than being transferred into a living trust.

In sum, a will and a living trust are two distinct estate planning tools that serve different purposes. While a will is a more straightforward document, a living trust can provide greater flexibility and control over asset distribution, and can help to avoid probate. It is important to consult with a licensed attorney to determine which option or combination of options is best for your particular situation.