“You can’t take it with you,” as the saying goes, so it’s essential to plan for what you’ll inevitably leave behind. Estate planning is a complex topic, especially if you have an estate with a lot of assets. To simplify, your will and living trust are the two main components of any estate plan.
To pass on your assets effectively and ensure your wishes are clear, you’ll need to understand the basics of wills and living trusts. Namely, you’ll need to know the differences between the two documents and understand each one’s unique function. Once you know this, you’ll learn how, when set up wisely, your will and trust can work together to enhance your estate plan.
As one of Chicago’s leading estate planning and elder law firms, the team at Peck Ritchey, LLC helps its clients and their families draft expertly-crafted wills and living trusts. Keep reading to learn more about wills, living trusts, and how the documents are essential to your estate plan.
What Is a Living Trust?
Most people have an understanding of wills and how they work. However, not as many people are familiar with trusts. Basically, a trust is a legal instrument allowing someone you choose to hold and manage your assets on behalf of your beneficiaries. The person who creates the trust is the grantor or trustmaker. The party who oversees the trust is known as the trustee.
Many types of trusts exist, each with different pros and cons. But the basic idea is that a third party will control your assets after you die or become incapacitated. The trustee then ensures your final wishes are carried out and distributes your assets to your beneficiaries according to your instructions.
A living trust is a trust still in effect while you’re still alive. A living trust allows you to serve as your own trustee (if you wish) and maintain control over whatever assets you place in the trust. While you can serve as your own trustee while alive, you can also designate someone to succeed you as a trustee and oversee the trust’s assets on your behalf after passing.
Key Differences Between a Will and a Living Trust
There are several crucial differences to be aware of when it comes to wills and living trusts, such as:
- A will goes into effect after you die, while a living trust deals with assets while you’re still alive.
- A will generally needs to be approved by the courts through the probate process before going into effect. After, your beneficiaries can collect any assets. A trust allows your beneficiaries to circumvent probate proceedings.
- A will can be difficult to change, while you can add or withdraw assets from a revocable living trust at any time.
- A will allows you to name an executor for your estate and a guardian for any young children, while a living trust generally does not include such instructions.
Why Your Estate Plan Should Include a Will and a Living Trust
You may ask, “Do I really need a will and a trust?” The answer is yes. Trusts and wills address different aspects of your estate and serve different purposes. As such, you should include both documents in your estate plan to meet various needs.
A will is fundamental to any estate plan, especially if you have young children. You can (and should) use your will to appoint someone to serve as your children’s legal guardian. If not, you may subject your family to lengthy, expensive court proceedings. In your will, you can also outline your funeral and burial arrangements and list beneficiaries to inherit certain keepsakes.
When considering your more significant assets, such as your home or business, a trust is a more practical way to uphold your wishes. A trust gives you greater flexibility in terms of what you can do with your assets, and a living trust allows you to make changes up to the moment of your passing.
Placing your assets in a trust also helps your beneficiaries avoid expensive estate or inheritance taxes upon your passing. Finally, probate proceedings are public record, but you can avoid disclosing your financial records or other documents to the public by establishing a trust to circumvent the probate process.
To learn more about effective estate plans, wills, and living trusts, our Chicago estate planning lawyers are happy to meet with you. Call (855) 328-5787 today or visit our contact page for a free, confidential consultation.