Revocable Living Trust vs. Will: Which Is Right for You?
Estate planning is about more than just deciding who gets your assets, it’s about making sure your wishes are honored, your loved ones are protected, and your affairs are handled smoothly. Two of the most common tools for this are the will and the revocable living trust. While both serve to distribute your assets, they operate in very different ways. Here’s a detailed look at how each works, their benefits and downsides, and examples to help you decide which might be right for you.
What Is a Will?
A will is a legal document that spells out how you want your assets distributed after your death. You can also use a will to name guardians for minor children and appoint an executor to carry out your wishes.
Example:
Jane, a single mother, writes a will leaving her home and savings to her two children. She also names her sister as the guardian for her kids if something happens to her.
Benefits of a Will
- Simplicity & Cost: Wills are generally easier and less expensive to create than trusts.
- Guardianship: Only a will allows you to name guardians for minor children.
- Flexibility: Wills are easy to update as your wishes change.
Downsides of a Will
- Probate: Wills must go through probate, a court process that can be time-consuming and public, potentially delaying the distribution of assets.
- Public Record: Once filed, a will becomes part of the public record.
- No Incapacity Protection: A will only takes effect after death and does not help manage your affairs if you become incapacitated.
What Is a Revocable Living Trust?
A revocable living trust is a legal entity you create to hold ownership of your assets during your lifetime. You can serve as the trustee and manage your assets, and you can change or dissolve the trust at any time. Upon your death (or incapacity), a successor trustee you’ve named will manage and distribute the assets according to your instructions.
Example:
Tom and Lisa set up a revocable living trust and transfer their home, investments, and bank accounts into it. They remain in control while alive, but if either becomes incapacitated, their chosen successor trustee can immediately step in to manage everything.
Benefits of a Revocable Living Trust
- Avoids Probate: Assets in the trust bypass probate, allowing for faster, private distribution to beneficiaries.
- Privacy: The trust’s terms remain private, unlike a will which becomes public.
- Incapacity Planning: If you become incapacitated, your successor trustee can manage trust assets without court intervention.
- Multi-State Property: Avoids multiple probates if you own property in more than one state.
Downsides of a Revocable Living Trust
- Cost & Complexity: Trusts are more expensive and time-consuming to set up, and require you to transfer (retitle) assets into the trust.
- No Guardianship Provision: You cannot name guardians for minor children in a trust, you still need a will for that.
- No Creditor Protection: Revocable trusts do not shield assets from creditors
Which Should You Choose?
- A Will may be sufficient if your estate is simple, you don’t mind the probate process, or you need to name guardians for minor children.
- A Revocable Living Trust is often better if you want to avoid probate, keep your affairs private, protect against incapacity, or own property in multiple states.
Most comprehensive estate plans include both a trust for asset management and probate avoidance, and a simple “pour-over will” to catch any assets not titled in the trust and to name guardians for children.
Disclaimer:
All content on this blog is for informational purposes only and should not be considered legal advice. While I am an investment advisor, I am not an estate planning attorney and do not provide legal services. Estate planning is complex, and laws can vary by state and individual circumstances. Before making any decisions regarding your estate plan, wills, trusts, or related matters, please consult a qualified estate planning attorney or legal professional.