October 16

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Difference Between A Will And A Living Trust

By Mac McLean

October 16, 2020


What is the difference between a will and a living trust? Estate planning attorneys use two different types of documents to distribute your assets. One is a will. The other, a living trust.

Each of these documents has its advantages and its disadvantages. And, neither is the perfect fit for every person.

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Here’s a quick look at the difference between a will and a living trust.

  • Timing: Perhaps the most significant difference between a will and a living trust is when they take effect. A will doesn’t take effect until the testator (you) is dead, while a trust starts distributing a person’s assets the moment it is signed. People like this feature of a trust because it lets them give their children a regular disbursement of their assets – an allowance if you will – that starts when the person writing the trust is alive and continues after he or she is dead.
  • Ownership:  A person’s will covers any asset – house, car, retirement account, etc. — that is in his or her name. On the other hand, people using a trust must transfer their assets from their name to its name to distribute them. People often forget this step when putting together their estate plans, and that could cost them.
  • Probate and privacy:  A probate judge or court reviews a will once the testator dies to ensure it is valid and follows his or her wishes. This process can delay the will’s execution and carry a high cost – depending on the testator’s state – while also making the will a public document that anyone can read. A living trust skips this review as well as the time delay, court costs, and public record requirement that come along with it. Though, this difference between a living trust and a will carries its own risk. To paraphrase Justice Louis Brandeis, “sunlight is the best disinfectant,” the more people see your estate plan, the harder it is to fake.
  • Worst case scenario: Because they don’t take effect until someone dies, a person’s will does not include a mechanism to handle situations where they become mentally incapacitated and cannot make decisions on their behalf. On the other hand, trusts let people specify a substitute trustee or trustees who will manage their estate when they die or become incapacitated. This difference between a will and a living trust should be of particular importance for people who have a history of dementia in their family or a physical condition that might put them in a coma before they die. It is also important to note that neither a will nor a trust bars someone from filling out a power of attorney form, which lets them choose someone to act on their behalf, as part of their overall estate plan.

Please note the rules regarding wills and trusts vary from state to state, particularly regarding tax considerations, limitations, the probate process, and how easy it is to transfer the ownership of assets. That’s why you should know everything you can about these documents before sitting down with an attorney to plot your course of action. A free workshop offered by PlanningCommunities.org is one of the best places to learn about wills, trusts, and the general estate planning process. 

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