Understanding a Living Trust vs. a Will

When planning for your financial future, you need to protect your family and your estate. Therefore, you will want to know the difference between a living trust vs. a will. These are important documents designed to transfer funds or property from your estate to your beneficiaries after death. But each has a unique function, and your choice may prevent delays in the distribution of your legacy.

The Will

A will is a legal document that simply gives direction about how to distribute property after death and identifies your beneficiaries. To transfer the estate from your name to their names, your beneficiaries will have to go to court and obtain a court order by a judge. The court order will provide your beneficiaries the legal authority to transfer ownership of the property and bank accounts. They cannot officially take possession of money or property until this procedure is completed and all debts are paid. This is known as probate.

The Trust

A trust is a legal arrangement that allows you to transfer legal title of your property to another person (or to yourself as trustee) to hold for the benefit of yet another person (beneficiary) in the cheapest and most effective way. The grantor names successor trustees to distribute the property after they die.

The Living Trust

A living trust allows the trust to take effect while the grantor is still alive. In order for this to happen, grantors must transfer their property and assets into the trust. A living trust is usually drawn up by a living trust attorney.

The Difference Between a Living Trust vs. a Will

The primary difference between a living trust vs. a will in California is that the provisions of a will can be carried out only by a court order – a lengthy and expensive process. When your estate is probated, you will have to file a separate income tax return for the estate. You will also be required to disclose private financial information which then becomes public record.

A trust gives the trustee the legal authority to distribute assets immediately to the beneficiaries based on the terms of the trust. No court is involved. No public notice of death is required as it is with a will. All that is required is a death certificate and a trust document that describes how items are to be distributed through the trust. Because a trust bypasses the court system, or probate, there are no fees, and there is no public record of the value of your estate, protecting your privacy.

A living trust company can help you create a living trust but you should always contact an attorney or a living trust lawyer. However, you need to consider the size of your estate when deciding between a living trust vs. a will here in California. Many states allow small estates to be administered through an expedited process either avoiding probate or using an expedited probate process. A living trust attorney may charge more for a living trust than a will as it is more involved. If you decide to purchase a living trust, it is still a good idea to have a will as a back-up document.

Safeguard Investment Advisory Group, LLC does not give legal advice. To determine whether a living trust, will, or other estate planning documents are right for you, please seek the advice of a competent estate planning attorney.