Farm Estate and Succession Planning
This blog focuses on making complex and difficult topics in estate and business planning understandable and applicable to the reader.
DIFFERENCES BETWEEN A LAST WILL AND TESTAMENT (“WILL”) AND A REVOCABLE LIVING TRUST
Jul 15, 2011
DIFFERENCES BETWEEN A LAST WILL AND TESTAMENT ("WILL")
AND A REVOCABLE LIVING TRUST
A last will and testament ("will") and a revocable living trust can both achieve the estate planning goals for families. They are two types of "vehicles" commonly used in estate planning. Some differences between a will and a revocable living trust and points of comparison between the two are as follows:
1. A revocable living trust has no special affect whatever on any tax, whether income tax, gift tax or estate tax, compared to a will. The very same tax planning can and usually does take place in either document.
2. Some expenses upon death will be the same either way. Lawyers and accountants must be hired and paid when a person with property dies, no matter what form the estate plan takes. Likewise, the delay in final distribution of the property, since that depends on getting everything in order (whether with court help or not), is usually about the same.
3. A revocable living trust can save some on Probate Court expenses. It usually takes more time and effort to check everything with the Probate Court, file notices, file accountings, and so forth. This extra work often leads to extra expenses.
4. A revocable living trust is private and is not required to be filed in court. A will must be filed with the court.
6. A revocable living trust can be a hassle during life. The trust is only as good as the assets it owns / controls. A revocable living trust requires that all substantial property, EXCEPT RETIREMENT ACCOUNTS, be "owned" by the revocable living trust. This is called "funding." The revocable living trust, and everything involved, i.e. keeping records, and the whole concept, can be difficult for many people.
7. Whereas a will can be a little more expensive after death, a revocable living trust is more expensive during life. A revocable living trust generally costs more to create, and there is a substantial amount of time and effort required at the creation of the trust.
8. A revocable living trust provides some protection upon disability. It can provide for someone to take over the management of finances should you become incapacitated. This is much easier and cheaper than a court-ordered conservatorship, if this ever becomes an issue. However, this problem can also be solved by the use of a Durable Financial Power of Attorney.
9. Neither a will nor a revocable living trust is able to provide any protection of assets from creditors or lawsuits for the trust makers. Moreover, neither a will nor a revocable living trust provides any protection from a possible long term care expense. Instead, the assets are fully accessible whether or not they are titled in your name individually or in the name of the trust.
When planning, it is important to consider your own personal goals with estate planning. This will help you determine what "vehicle" is best for you.
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