06 Dec A Revocable Living Trust Vs. a Will: Which One is Right for You?
When it comes to estate planning, it’s important to make sure your documents are designed to fit your needs. Different legal documents have different purposes, as discussed in an earlier blog post. However, the purposes of some documents do overlap, such as a revocable living trust and a last will and testament. Both of these estate planning documents enable you to pass assets down to heirs. However, both accomplish this task in a different way. Read on to discover the benefits and drawbacks of using each document to pass along assets.
What is a revocable living trust?
A revocable living trust is a type of trust often used in estate planning. It’s made up of three components: a grantor, who creates and places assets into the trust; beneficiaries, who receive the assets; and a trustee, who manages the trust.
Benefits
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- Flexibility: One of the key benefits of using a revocable living trust to pass down assets to heirs is flexibility. A revocable living trust is flexible because the trust’s provisions can be changed at any time. This means that the grantor’s assets are not locked in and remain accessible.
- Durability: Another benefit to a revocable living trust is durability. A revocable living trust is durable because assets placed within this type of trust will continue to be managed even if the grantor becomes incapacitated or dies. This means that the assets placed within this type of trust are protected against unforeseeable circumstances.
- Privacy: Privacy is perhaps the most well-known benefit of a revocable living trust. A revocable living trust provides the grantor and their heirs with privacy by avoiding probate. Once documents are filed in probate, they become public record. Anyone can access public records, so by avoiding probate, the public is not privy to who gets what in the family.
Drawbacks
Limited Ability: The main drawback of a revocable living trust is its limited ability. A revocable living trust is limited in its abilities because its only use is for passing assets down to heirs.
What is a last will and testament?
A last will and testament is a customized document. It lists instructions for how you’d like your assets distributed among your heirs. You also appoint a personal representative, otherwise known as an executor, in this document. The executor is responsible for distributing your assets.
Benefits
Multi-Functionality: The main benefit of a last will and testament solves the main drawback of a revocable living trust. This is because a last will and testament covers more ground when it comes to estate planning and is multi functional. A last will and testament is multi functional because besides including a place to list instructions for the distribution of your assets, it provides a space to appoint a legal guardian for minors. For this reason, families that include small children should create a last will and testament.
Drawbacks
1. A lack of privacy: One of the main drawbacks to using a last will and testament to pass down assets to heirs is that a last will and testament must be filed in probate court. As previously discussed, once the document is filed in probate court, it becomes public record. This means the inheritance of your heirs is public information, so anyone can access the information in your document.
2. The Unknown: The unknown is a drawback of using a last will and testament to pass down assets to heirs because a last will and testament doesn’t take effect until death. This means that if you become incapacitated, the assets listed in your last will and testament cannot continue to be managed.
Solution? Create both.
The easiest way to get around the drawbacks of both documents is to create both. That way, you have a guardian appointed, but your assets can avoid probate and have an added layer of protection in the event you become incapacitated. To learn how Boyum Law can help you create your own revocable living trust and last will and testament, click here.