Should I have a revocable living trust or a will?
People often wonder about the advantages of having a living trust rather than a will. This article discusses the main differences between revocable living trusts and wills. Significant advantages exist to having a revocable living trust, although there are a few disadvantages as well. Ultimately, each family’s or individual’s unique situation deserves careful attention to determine what type of estate plan best suits their needs.
Wills and Trusts Defined
Both wills and trust outline who should receive your assets when you die. If you die without a will or trust in place, your property will pass via the pre-determined “intestate succession” rules set forth under Oregon’s statutes. If you want to control disposition of your own assets rather than the de facto plan, you will need to create an estate plan using either a will or trust.
Most people have a general concept of a will. This formal document names the beneficiaries of your assets and appoints a personal representative to distribute those assets and wrap up your affairs under the close supervision of the probate court (more on this below). A will depends on the court process to become fully implemented.
As its name suggests, a revocable living trust is a trust you create during your lifetime by transferring assets to a trustee, who holds and manages them for the benefit of your beneficiaries. Most people who create revocable living trusts often serve as initial trustee and name successor trustees to replace them at death or if they become financially incapable. With a revocable living trust, you retain the ability to revoke the trust at anytime, thereby retaining control of your assets. When you die, the trustee of your trust can distribute all of the trust’s assets directly to the beneficiaries without having to initiate the probate process.
The probate process can be cumbersome, expensive, and time consuming. Presuming no issues, probate typically costs approximately $3,500 to $5,500 and takes anywhere from six months to a year to complete. Further, information regarding your estate, including the proposed distribution of your assets, becomes public information. This is because the public can generally access probate information. Many people prefer to set up an estate plan that avoids the cost, lack of privacy, and formalities of the probate process.
Advantages of Revocable Living Trust
A properly drafted revocable living trust avoids probate and allows family members to keep your financial information private. By avoiding probate, your family can also save the costs associated with probate and the lengthy delays necessitated by the complicated court process. Since the trustee does not have to navigate the probate process, the trustee can settle the estate much faster.
A living trust can also provide you with a way to outline who should care for your property and finances in the event you become financially incapable. This features eliminates the need to apply to the court for a conservator.
Disadvantages of Revocable Living Trust
Despite the advantages of a revocable living trust, this planning mechanism might not be best for everyone. Younger couples who are in accumulation mode may opt to have a will rather than a living trust due to the hassle factor of ensuring everything is titled in the name of the trust. Additionally, a trust costs more to prepare than a will. On the other hand, the savings are typically far more by avoiding probate.
Even if the parties opt to have a revocable living trust, they must recognize that they still need a pour-over will. Only assets that have been properly transferred into a trust will be distributed according to the trust’s terms. If, for some reason, you have assets that are not titled to the trust, those assets will pass outside the trust. A pour-over will ensures that any assets that were not titled to the trust are moved into the trust upon your death. Estate planners should always include the pour-over will as part of the overall package for the living trust.
Typically, the advantages of the revocable living trust far outweigh its disadvantages. With that said, you may opt to have your estate pay the costs of probate rather than paying the costs up front to set up a living trust. Julia Rice will examine the make-up of your estate assets and your goals to help you determine which avenue works best for you and your family.