revocable living trust avoid probate

How do you know if you need a Will or Trust?

Do you need a Will (Last Will and Testament) or Revocable Living Trust? How do you choose?

Are you interested in a will or revocable living trust? Wills and trusts are useful estate planning tools. They serve different purposes and can even work really well together. First, let’s go over key differences between wills and trusts.

Will characteristics:

  • A will goes into effect only after you die.
  • It only covers property that is in your name at your death.
  • A will passes through a court process called Probate. The Probate court oversees the will’s administration and ensures the will is valid and that the property gets distributed the way the deceased wanted.
  • Because a will passes through Probate, it’s a public record.
  • A will lets you name a guardian for your minor children.

There is a good chance that if you care about how beneficiaries use what you’re leaving them or want someone else to manage it, you’re going to need some type of trust.

The two main types of trusts are testamentary trusts and revocable living trusts. One type of trust is inside your will and the other type of trust is a stand-alone document, called a trust agreement.

Testamentary trust characteristics:

  • A testamentary trust is a trust that you create through your will. A will is only “activated” after you die and after your will goes through Probate. Therefore, a testamentary trust only goes into effect after your death.
  • For our clients with young children who are using a will instead of a revocable living trust, we recommend a testamentary trust inside the will.  That is because children can’t inherit directly while they are minors. And even if they’re not minors, it’s not a good idea to let an 18-year old inherit a lot of money at once!  With a testamentary trust, your trustee (the person you trust to manage money for your children) can provide for your children’s healthcare, education, maintenance and support while your children are minors.
  • You can include provisions in your trust to allow your beneficiaries to inherit at ages and stages, all at once, or for the funds to stay in the trust for that beneficiary’s care and support.
  • Funds that go inside the testamentary trust first have to go through the Probate court process before they wind up inside the trust.
  • The will (and the testamentary trust that’s inside it) is filed with the Probate court.

Revocable living trust characteristics:

  • A revocable living trust is a trust that you create during your lifetime. It is  “revocable” because during your lifetime, you can make changes to it or even revoke it.
  • You can use a trust to manage property during your lifetime, at your death or afterwards.
  • A trust covers only property that you transfer into it during your lifetime, or after your death (via beneficiary designations).
  • Property that passes through your trust avoids the Probate court process.
  • The revocable living trust stays private because it’s not filed with the Probate court.
  • You can include provisions in your trust to allow your beneficiaries to inherit at ages and stages, all at once, or for the funds to stay in the trust for that beneficiary’s care and support.

So if you have a revocable living trust, do you still need a Will?

Yes, you still need a will, a pour-over will. That is generally a very streamlined will that basically “pours” everything that needs to go through Probate to your revocable living trust. We also call this a “just-in-case” will, in case there is property you forget to transfer to your revocable living trust.

Also, if you have minor children, you can use your pour-over will to legally  nominate guardians for your children, in case you and their other parent dies when they are minors.

OK so do you need a will, will with testamentary trust provisions or a revocable living trust?

It depends on different factors and on your priorities such as:

  • Do you want to maintain privacy for your beneficiaries?
  • What is your budget for estate planning? (A revocable living trust costs more to set up than a will).
  • Do you want to avoid Probate?
  • Do you prefer everyone to stay out of Probate court as much as possible?

We can help you sort this out so that you can have peace of mind.

Call us at (813) 902-3189. Schedule a valuable Planning Session at no cost to you.

Learn more about wills, trusts and guardianships here.

You can also learn more about revocable living trusts here.