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Estate Planning Series
Part III: Simple Will vs. Living Trust
One of the most common questions estate planning clients ask is whether or not they need a Trust or a Will. As with most client legal questions, of course, the typical “lawyer” answer still applies: it depends.
Every individual and family has a different set of facts and circumstances. For some, having a Revocable Living Trust Agreement as the cornerstone of their estate plan, paired with a Pourover Will, might best suit their needs. For others, a simple Will can accomplish everything you want.
Before we get into the pros and cons, it is important to understand a basic definition of each:
A Will is a document that takes effect when an individual dies and it dictates how to distribute that individual’s property. It essentially provides a set of instructions for administration of your estate to the probate court.
A Living Trust is a document dictating how you want your property distributed for your benefit when you are unable to care for yourself, and how you want your property distributed upon your death.
WILL
Advantages:
• Simplicity
• Less expensive to create than a Living Trust
Disadvantages:
• Does not avoid Probate, which can be…
o Costly, depending on the value of probate assets;
o Time-consuming, generally taking a minimum of one year for estate administration
o Public (the Will and all related documents filed with the Court are public record)
• Easily contested (when compared to a Living Trust)
LIVING TRUST
Advantages:
• Flexibility
o An individual has much more post-death control over their assets, such as dictating requirements for beneficiaries to receive certain benefits.
• Certainty
o Since a Trust is created and funded during your lifetime, it is much more difficult to assert upon your death that the terms of the Trust do not express your desires.
• Sharing of Enjoyment
o Trusts allow for lifetime use and enjoyment for one beneficiary, with the remainder passing to others after the first beneficiary’s death.
• Probate Avoidance
o If an individual has multiple parcels of real property, deeding that land to the Trust can avoid the necessity of probate in another state.
o Assets titled and owned by the trust become non-probate assets, and bring down the costs of probate – often avoiding the process altogether.
o The terms of a Trust do not have to be recorded or filed of record, providing privacy and confidentiality to the drafter.
Disadvantages:
• Complexity
o Paperwork on the front end (transferring properties, accounts, etc.) can often make the creation of a Trust more burdensome and complex
o Management of assets by a Trustee (both before and after the death)
• More expensive to create than a simple Will
While it may seem that Living Trust-based planning offers more advantages than Will-based planning, in reality, everything depends on an individual client’s circumstances, wants and needs. It is also important to remember that a Living Trust is not the only avenue for probate avoidance. Titling real property, bank accounts, vehicles, and other assets with survivorship rights or paid-on-death beneficiaries allow an individual to have direct control over the distribution of those assets without probate involvement.
Additionally, if probate avoidance is not a primary goal, but an individual still wishes to have gifts to others, young children for example, held in trust after the individual’s death, a testamentary trust can be created in the Will itself.
Regardless of your circumstances, having a plan in place is essential. A conversation with a South Carolina licensed attorney is the perfect place to start in determining what documents are best suited to your needs.