What is the difference between a living trust and a will?
March 3, 2003
Date: Mon, 13 Jan 2003
Could you please tell me what the difference is between a living trust and a will?
Date: 5 Feb 2003
This is a complex legal question for which you should consult with an attorney. Here are four important considerations.
- With a will, your property must go through a court-supervised administration called probate. There are published "statutory" fees paid to an attorney and, unless waived, to the executor. Assets in a living trust are not subject to probate, and the fees paid for administering the trust after death are often less than when a probate is required. (Don't kid yourself. It's still expensive!)
- Since assets administered under a will are subject to probate, they are a matter of public record. Anyone can go to the courthouse and find out about your family's assets. Assets in a trust are not a matter of public record, so your family enjoys privacy in its financial affairs.
- Property received after going through probate is not subject to contingent liabilities of the decedent. There is a procedure in California (and possibly other states) to give similar benefits to beneficiaries of a trust, but it increases administration costs and prolongs administration. Traditionally, attorneys have preferred to probate the assets of professionals like doctors, lawyers, dentists and accountants for this reason.
- The income and estate consequences of wills and revocable trusts can be very similar. (But some living trusts, such as an irrevocable life insurance trust, can avoid estate tax.) (A revocable trust means a trust you can change or cancel.)
Estate planning is not a "do it yourself" project. Get thee to an attorney!
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