The difference between a will and a trust is when they come into action. A will sets out your wishes for after your death. A living revocable trust comes into effect. As long as you're alive you can be in charge of your trust.
Trusts are frequently used in estate planning. Living trusts created during the life of the grantor facilitate the transfer of assets to heirs without the cost and publicity of the estate. Trust transfers are usually faster and more efficient than will transfers. These fiduciary transfers allow grantors to maintain privacy with respect to the nature and value of their assets.
They can be used to maintain the confidentiality of different values of assets transferred to different heirs. Ensuring the privacy of family businesses and real estate held through entities not publicly identified with their owners are additional reasons for using trusts. Yes, you can have both a living will and a living trust because they do two different things. Trusts are responsible for the administration and distribution of your assets during life and after death.
On the other hand, a will allows you to do things like naming guardians for your children, appointing an executor for your estate, and stating your final wishes. A comprehensive estate plan can include both a will and a trust. Both revocable living trusts and wills allow you to review your document when your circumstances or wishes change. The decisions you make in these documents will not be set in stone until you die.
A similarity between a revocable living trust and a living will is that both protect against mental disability. Your successor trustee takes over the administration of your trust if you reach a point where you can no longer handle your financial affairs. A living will can do much the same for your health care. Express your wishes if there comes a time when you can't do it.
A living trust is more expensive to establish than a typical will because it must be actively managed after its creation. However, the most important thing is that a living trust is of no use unless. You are always free to revoke your decision later if you form a revocable living trust instead of an irrevocable one. Most revocable living trusts (including the one you can purchase through the %26 Will trust) include what is called a “spill will”.
A revocable trust can be undone or altered by its creator (known as the grantor or trust creator) at any time. One of the most fundamental decisions you can make when you think about how to transfer your assets to heirs is whether you have assets in a revocable trust or, more simply, you hand them over through a will. With revocable living trusts, the grantor is still considered the owner of the trust assets, even though a separate entity is formed because the trust can be modified at any time. Some people create additional wills to their revocable trusts to deal with any property that is left out of the trust without realizing it.
Revocable trusts, sometimes called living trusts, are more often used instead of wills to reduce estate expenses and delays, says Baker. A living trust is managed by a trustee, and the creator of the trust generally performs this role when the living trust is revocable. The creator of the trust cannot act as the trustee of his irrevocable trust and must waive any right to return the assets to his personal property. A grantor often acts as a trustee of its own revocable living trust, managing the assets held in it during its lifetime.
Meet with an estate planning attorney to make sure you have all your bases covered if you're not sure if you need a living will, a revocable living trust, or both. If the trust is a revocable trust that you control and you are entitled to receive (or direct) any financial returns, the trust assets will be included in your taxable estate. Here are the important things you'll want to consider about wills and revocable trusts and why a will simply may not be enough as an estate plan for many people. A charitable remnant trust is an irrevocable trust that provides current income to the grantor or other designated non-charitable beneficiaries and a partial tax deduction based on the valuation of the assets contributed.