A Revocable Living Trust vs. A Will

A Revocable Living Trust vs. A Will

Choosing between a revocable living trust (RLT) and a Will may seem difficult. Let an experienced Colorado estate planning attorney help you understand the differences. Here are the pros and cons of each.

Wills

A Will is a simple and short document that states to whom your assets will go in the event of your death and whom you trust to execute your wishes. For example, a Will may be summarized as follows:

I want all my property and belongings to go to my spouse and if he (or she) is not living, then equally to my adult children.
My spouse will be the personal representative or executor of my estate, and if he (or she) is not living, my brother will be my personal representative.

A Will is attractive to some because it can be quite simple and works well to manage the distribution of small estates. However, it won't avoid probate.

Probate is the legal process of administering a deceased person's estate. In probate, your executor will file papers with a probate court to receive letters testamentary, giving him or her the authority to execute all your wishes, such as accessing your bank account and making the distributions you specified in your Will.

Probate will not result in additional taxes, and if you have everything jointly titled with your spouse, then probate will only be necessary after the second spouse dies.

A Revocable Living Trust

Like a Will, a revocable living trust states to whom your assets should go in the event of your death and who you trust the handle that distribution. A trust is, however, a longer, more complex document, but allows you to provide for the following benefits:

  1. Conditions
    You may wish to place conditions on distributions from your estate. For example, a trust may specify:
    I want all of my assets to go to my spouse and then equally for the benefit of my children. But, I do not want my children to receive the money all at once.
    The money should be held in trust and my trustee should determine when and how much to distribute to my children and for what purposes.
  2. Asset protection for your beneficiaries
    While your assets are held in a trust for your loved ones after your death, if you have named an independent trustee, then your beneficiaries' creditors cannot get paid from the trust assets. Furthermore, the trust principal will be more likely to be considered separate rather than marital property in the event your beneficiary gets divorced.
  3. Avoiding probate A revocable living trust has the additional advantage of avoiding probate if it is properly funded when you die. You can create a revocable living trust now, and transfer all of your probatable assets into it. Then when you die, your successor trustee will not need to open a probate to gain access to your assets and follow your wishes.
    Note: Your Will may include what is referred to as a testamentary trust. A testamentary trust is a type of trust that is created within your Will - often to create a trust for minor children - but does not go into effect until you die.

    Both a testamentary trust and a revocable living trust will allow you to place conditions on distributions from your estate and provide asset protection for your beneficiaries. But, only a living trust has the additional benefits of avoiding probate.

    Keep in mind, however, a disadvantage of any kind of trust is that it requires some administration and costs after your death, while your assets are held in the trust.

Conclusion

A Will - can be nice, simple, and short. It works well to manage how the assets of a small estate will be distributed. But it normally won't allow you to structure distributions from your estate, provide asset protection for your beneficiaries, nor will it to avoid probate.

A testamentary trust - is created inside a Will but goes into effect only after your death. It allows you to place conditions on distributions from your estate and provide asset protection for your beneficiaries. But it does not avoid probate.

A revocable living trust - is more complicated to set up, but allows you to place conditions on distributions from your estate, provide asset protection for your beneficiaries, and to avoid probate if it is fully funded with all of your probatable assets when you die.

All of these work well to determine how your property will be distributed after you die. But, only a revocable living trust allows you to avoid probate. Moreover, a Will should only be used to manage the distribution of a small and uncomplicated estate.

Consult with an Experienced Colorado Estate Planning Attorney

An experienced Colorado Estate planning attorney can assist you in determining whether you need a Will, a Will containing a testamentary trust, or revocable living trust to address your estate planning goals. Furthermore, your attorney can assist you in preparing all of the necessary documents.