Will vs. Trust, which is better? Will subjects to probate proceedings and the cost could be substantial, while Trust costs more to prepare. Is a lawyer needed in preparing Will or Trust? or can use the legal services provided by Susan Orman or Legal Zoom?
From Legal Zoom:
"What Is a Will?
A will is a written document—signed and witnessed—that indicates how your property will be disposed at the time of your death. It is revocable and subject to amendment at any time during your lifetime. A will that contains a trust can provide after-death property management and be used for estate planning. It does not provide the same pre-death management as a trust but a general, durable power of attorney used in conjunction with a will can provide similar functions. A will also can provide the same estate tax savings as a living trust. The pre- and after-death management and tax savings of the two can be identical.
What Is a Living Trust?
A Living Trust provides lifetime and after-death property management or carry out tax-related estate planning. If you are serving as your own trustee, the trust instrument will provide for a successor upon your death or incapacity. Court intervention is not required. Livings trusts also are used to manage property. If a person is disabled by accident or illness, the successor trustee will manage the trust property. As a result, the expense, publicity and inconvenience of court-supervised protection of your estate is avoided
If a living trust is properly written and funded you can:
· Avoid probate on your assets;
· Name a guardian and make provisions for minor children;
· Plan for the possibility of your own incapacity;
· Control what happens to your property after you are gone;
· Use it for any size estate; and
· Prevent your financial affairs from becoming a matter of public record.
While a trust sounds appealing there are drawbacks. A living trust is more expensive to set up than a typical will because it must be actively managed after it is created. This estate plan has no effect on any taxes—income, gift or estate. Most importantly, however, a living trust is useless unless it is funded. A living trust only can control those assets that have been placed into it. If your assets have not been transferred or you should die without funding the trust, the trust will be of no benefit as it will still be subject to probate and there may be significant estate tax issues.
Trust vs. Will Considerations
There are many positive reasons to establish a trust but do not overlook the fact that it will involve more upfront effort and expense to set it up properly. To determine if you should make the extra effort and invest in the expense of a trust, answer these questions.
Is informal probate an available option? Most states have an expedited or simplified form of probate for estates under a certain dollar threshold (that dollar value varies by state). If your estate could pass under an expedited form of probate, or if you live in a state where probate is not a complex or burdensome process, a will could be appropriate.
Do you own more than one piece of real property? If so, you may want to consider a living trust since each property will likely be subject to some form of probate.
Do you have minor children? If you do have children, a trust may be appropriate. It allows you to name a guardian for any minor children (so does a will) to establish provisions specifying particular life events when a child will be entitled to any assets held in trust.
Do you have children, grandchildren or other dependents with special needs? In those instances the access or control those heirs have over their inherited property may need to be limited. With a standard will your property can be passed on to those heirs but a will alone does not allow you to exercise much control over their use of the property.
Will your estate be subject to estate taxes? If the value of your estate (all possessions including home, life insurance benefits, retirement accounts) will be $1.5 million or higher (as of 2004 and 2005) you may wish to consider setting up a trust with tax planning provisions, such as an AB or an ABC trust.
Will you actively manage your estate plan? If not, a living trust may not be a suitable solution. Again, a trust will only be beneficial if assets are transferred into it.
So what is best for you? In many respects, a living trust and a will accomplish similar objectives. A trust, however, allows you to realize other objectives that a will cannot. But those advantages don’t come without a price. Whether or not a living trust is better for you than a will depends on whether the additional advantages are worth the cost. When choosing, remember one size does not fit all. What is right for one person may not be right for everyone. Your estate plan should be prepared in a way that best meets the needs of you and your family."
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