No matter how small (or big) the size of your financial assets may be, it is a must to have a proper legal document that will allocate said assets at the time of your death – and in accordance to your wishes.
Most people solve this problem by making a will. And why wouldn’t they – it is legal and offers a good way to distribute your assets after you die. That being said, there are other documents that can be used in place of a will.
One such document is a living trust. It works a lot like a will but has some slight differences that offers some solid benefits. Ironically for something that is essentially more dynamic than a will, living trust are used quite rarely. In fact, only as little as 20% Americans use living trusts.
For the rest who don’t here are 3 compelling reasons why a living trust works better than a will. But first, let’s know what the difference is between these two documents.
Living trust vs. will
Often called an “inter vivos” (meaning revocable) trust, a living trust is a legal document through which you can have your assets placed in trust. Not only will this help you after you die, it will also help you during your lifetime. Once you die, your assets will be transferred by a “successor trustee” i.e. a chosen representative to your desired beneficiaries.
Alternatively, a will allows you to make a plan of how your assets should be distributed after you die. An executor, who you will name in the will, will oversee the process for distribution of assets, but that can and does happen only when you die.
Benefits of a living trust
You can avoid probate with a living trust:
The key benefit that a living trust offers is avoiding probate. A will – even when it is valid goes through the lengthy process of probate, which consumes a lot of time and energy on top of the stress of losing a member of their family. A living trust, however, has no such strings attached – and therefore facilitates quicker distribution of assets – weeks, as opposed to months (or even years with a will).
A living trust is more cost-effective:
While this largely depends on your overall financial situation, a living trust usually costs way less than a will in the long run. A living trust does cost more initially, since you have to make actual transfer of assets (like stocks, bank and bond accounts, certificates etc.) via a separate set of paperwork, in addition to writing the living trust. It is, however, more cost-effective when it comes into action as you need not have the living trust go through the lengthy probate process upon your death. They will also hold up better in the event someone contests it after your death.
A living trust helps provides a better level of privacy:
This is another major benefit that comes with drafting a living trust. Contrary to a will, a living trust is not a public document, and any assets that are distributed will be done in private. This avoids any and all transactions to be put on public record.
Additionally, a living trust will easily help you handle any property of yours that may lie out-of-state. Even with a will, such property would have to go via the probate process in both the property’s state and in yours, making it a very inconvenient and long-drawn process.