It is important to plan all you have worked hard for through the years. So your hard work doesn’t go down the drain and also secure a future for your loved ones. Living trusts and will are some of the planning tools you would need. You can make your choice between a living trust and a will. However, you can actually use both to create your instruction and wishes after you are gone. Here we are also going to discuss the cost of revocable living trust vs will in California and Texas. This will help you choose the better option.
What is living trust?
A living trust is a document you can use to name an inheritor for your property. You can also call it lifetime and after-death property management. However, the main feature of a living trust is that it appoints a trustee to manage and distribute trust property after your death.
Therefore, property that passes through a living trust does not go through probate, which can save your loved one’s time and money. Living trusts are most preferred by many people specifically to escape probate.
Moreover, living trusts are more complex and expensive to set up and maintain. A living trust cannot be used to name guardians or an executor for young children. So while you are considering setting up a living trust, you should also consider having a will as well. Most people make use of both because your living trust cannot accommodate every detailed information
What is a will?
A will is a comparably simple document where you have a say in what should happen to your property after your death. It can also be used to name guardians for your young children or an executor, forgive debts, and choose how to pay your taxes. After your death, your executor pays any leftover debts or taxes and distributes your property following your last will. This process is highly-structured and court-supervised. It is known as “probate” and it’s acclaimed to be time-consuming and costly.
Note: In a Last Will, the testator names inheritors for their assets and an executor to carry out their last wishes. Anybody can be named as your executor, be it a relative or a non-relative.
What Are the Disadvantages of a Living Trust?
Revocable living trusts do not protect assets from creditors. Administrative Work Required — Transferring all your assets to a trust requires time and work. Probate is required for all non-trust assets.
Living Trust vs Will
Wills and trusts are both estate planning strategies that can help guarantee your assets are secured and passed on to your descendants, other than your spouse, which is usually not an issue. This is due to the unlimited marital deduction provision in the United States Estate and Gift Tax Law, which allows money to be passed on to a surviving spouse without incurring gift or estate tax consequences. 1
When wealth is passed down to the next generation, the transfer procedure becomes much more involved. It is possible to have a will as well as trust.
A will is a written document expressing a dead person’s wishes, on how his assets will be shared. It becomes functional only after one’s death while trust starts to function the very day you create it. Also, the deceased/grantor while still alive may list the placements of properties before their death in it, unlike a will. There are irrevocable trusts, sometimes made for tax purposes, which cannot be changed after their creation, but living trusts can be revoked by the grantor.
Also, all wills must go through a legal process called probate. This is where an authorized court administrator examines them. Moreover, this process can be stretchy and likely testy if family members contest the will. On the other hand, there’s no need for trust to go through probate when the grantor is dead because the cannot be contested. There are no court and no attorney fees after the trust is firm. Your property can immediately pass directly to your named inheritor.
Why Trust Is Better Than a Will?
A will doesn’t take effect until after you die, but a living trust does as soon as it is set up and money is put into it. This means that a trust can protect you and decide what happens to your assets if you lose your mind, which a will can’t do.
Revocable Living Trust
Let’s take a look at a revocable living trust for estate planning. A trust, like a will, will require you to distribute property to loved ones after your death. A living trust is so named because it is established while the property owner, or trustor, is still alive. It is revocable because it can be amended throughout the trustor’s lifetime. While the trustor is alive, the trustor retains ownership of the trust’s property.
When the trustor dies, the trust becomes operational. A living trust, unlike a will, transfers property outside of probate court. After the trust is established, there are no court or attorney fees. Your property can be transferred to your designated recipients promptly and directly.
Revocable Living Trusts vs Last Wills
A Revocable Living Trust is a legal document that a property owner, also known as the grantor creates to transfer wealth or protect assets. However, the grantor can change or amend their living trust at any point in their life.
Also, the grantor will have to appoint a trustee to control and manage their assets. A trustee can be in form of a person or a group of people. However, this person/persons have the title to hold the property or assets for the benefit of another person. A trustee carries out the grantor’s last wishes accordingly.
Moreover, many people create living trusts and name themselves and their spouses as trustees. Here, you are totally in charge of your trusted assets and property while you’re alive. This similarly, applies to the last Will, where you control your property until you die.
Some people also name successor trustees who will have to step in if something happens to the primary trustee. It’s better to have a successor co-trust if you don’t have someone to be a co-trustee.
Meanwhile, People sometimes use trusts to protect assets with high monetary value. These assets might include business interests, stocks, bonds, or valuable personal property. It’s rare to put lower-valued property that requires insurance (like a car) into living trusts. Comparing revocable living trusts vs will, while the living trusts are used for high valued assets, wills can include all property and assets regardless of value.
Further, the purpose of a Living Trust is to seal your assets and control property, which is also something similar to the Last Will. However, trusts are better options for individuals with multiplex estates and high-value assets.
Revocable Living Trust vs Will similarities
A trust is similar to a will in the sense that they both will require you to hand over your assets to loved ones after death. Therefore, it is known as a living trust because it’s created while the property owner/ trustor is still living. It is revocable, as it can still take in some changes during the life of the trustor. The trustor remains the sole owner of the property maintained by the trust while the trustor is alive. The trust, however, becomes functional at the trustor’s death.
A revocable living trust and will similarly, provide details for sharing your assets after death. However, the two documents are different in their proceedings as a living trust doesn’t need to go through probate to be executed. But, the reverse is the case with a will.
You should most importantly note that probate is the legal process in which a court determines the logic of a Last Will. Therefore, when someone dies without leaving a last will, their property still undergoes the process of probate. Subsequently, the court will choose a representative to act as the executor and divide up the property following state law.
Why do you think you should have a revocable living trust compared to a will. A revocable living trust helps you avoid the probate process. Also cuts down the time and expenses that come with the sharing of assets to your inheritor in a Last Will.
Living Trusts vs Will California
Some people choose to establish revocable living trusts vs wills in California. Where will simply define who gets what and how through the sharing of your assets after you die. Properly established and funded California living trusts can make the process of administering your estate simpler and can avoid the need for lengthy or costly probate court proceedings.
Living trusts can also allow for assets to be managed in trust for inheritors for years after their death. It also allows you to assign someone to manage your trust assets for you should you become unfit.
Read Also: LIVING TRUST: Overview, Cost, Templates, Pros and Cons (+Writing Guide)
The role of wills to Californians is of two main purposes. Firstly, they identify to whom and how probate assets will be shared after your death. Most importantly note that probate assets are assets that pass through your will, including assets you own in your name alone.
You will also identify who will serve as your executor. This is the person who is responsible for handling administrative matters after you die, settling your estate in accordance with your wishes and with California law.
For some Californians, the best option may be to use both living trusts and wills in their estate plans. Parents of minor children might use wills to choose who should have guardianship of their children while using living trusts to state how their real estate and other property should be managed and distributed. When in doubt, consult with a California-licensed estate-planning attorney to understand whether a living trust vs a will or a combination of both would make the most sense for you.
Cost of living trust vs will
The cost of living trust vs will could be overwhelming, most people however prefer Living trusts to avoid the cost of probate. Moreover, probate is the legal process that determines that a will is valid. It is a lengthy process but be sure to note that the executor distributes your property according to your wishes. An estate plan that includes a living trust may cost $1,000 to $3,000, versus a simple will that may cost $300 or less.
Living Trust vs Will in Texas
Living trusts are not so common in Texas but, are widely used in several other states including California. Comparing living trust vs will in Texas and the cost, most Texans will prefer a will to a living trust.
However, Several reasons are commonly given for using a will rather than a living trust in this State. The cost of living trust vs a will shows that trust is more expensive to create than a will in Texas. Assets have to move to the trust after it is set up in order for the trust to work, which is not necessary for a will. And a probate proceeding in Texas, if the executor qualifies as an Independent Executor, is much quicker and generally less expensive than in other states where living trusts are widespread.
Many types of assets pass automatically at the owner’s death outside of the probate process, including property held in joint tenancy or pay-on-death form, life insurance, and retirement accounts. These types of assets pass to a designated beneficiary regardless of what the owner’s Will may say. So the estate plan which contains a person’s Will can easily and inadvertently be a defeat form of title that avoids probate. This problem is less with a living trust where title to assets is in the trust’s possession.
Why Is Will Preferable in Texas State?
In many cases, these reasons justify the use of a will rather than a living trust, when comparing living trust vs will in Texas but not always. When a person owns real property in another state, having a living trust will avoid the necessity for two probate proceedings, one in each state, which makes a living trust more desirable than a will.
Also, a living trust provides a significant lifetime advantage if a person becomes unfit. With a living trust, the trust assets will continue to be managed for the person’s benefit by the trustee without the court-supervised guardianship proceeding. In contrast to a Texas probate proceeding with an Independent Executor, which involves minimal court supervision, a Texas guardianship proceeding requires extensive court supervision. This can be costly and time-consuming.
Another advantage of a living trust over a Will is privacy. With a Will and a court-supervised probate proceeding, an inventory of a decedent’s estate becomes a matter of public record. A living trust, on the other hand, is a private document and not subject to public inspection.
Finally, even though a Texas probate proceeding is relatively quick, there are court costs and legal fees to pay. Meanwhile, in Montgomery County, a court appearance by the executor who may be a spouse/ an adult child is required. This is not the case with a living trust.
Conclusion
Comparing the cost of Living trust vs will, the prices differ in California and Texas states. The revocable living trust is more preferable in California, while the will is more preferable in Texas comparing the costs. So, whichever options you decide to go for, make sure it is the right option for you.
Frequently Asked Questions
Do I need a will if I have a living trust?
A living trust is similar to a will in that it is a legal instrument in which you give your possessions to whomever you wish. But we strongly advise that even if you create a living trust, you should also create a will.
What should you not put in a living trust?
- Qualified retirement accounts – 401ks, IRAs, 403(b)s, qualified annuities.
- Health saving accounts (HSAs)
- Medical saving accounts (MSAs)
- Uniform Transfers to Minors (UTMAs)
- Uniform Gifts to Minors (UGMAs)
- Life insurance.
- Motor vehicles.
Why have a living trust instead of a will?
When you use a revocable living trust instead of a will, assets owned by your trust will avoid probate and pass to your heirs in the manner specified in the trust documents. A trust allows investors to retain ownership of their possessions long after they have died.
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