When crafting your estate plan, you’ll find there are several options at your disposal. Between wills, trusts and everything in between, you may find it difficult to choose the right options for you. And while most people are familiar with a Last Will and Testament, there is another, lesser known estate planning tool you have in your arsenal – the living trust.
What is a Living Trust?
A revocable living trust is a legally recognized document allowing you to place assets within the trust for your benefit during your lifetime. Upon your death, the successor trustee named within the trust transfers the assets to the designated beneficiaries.
Key Benefits of Choosing a Living Trust for Your Estate Plan
- Provides protection for disability or incapacity. A will only goes into effect after you die. In the event you become incapacitated or mentally disabled, a court appointed trustee will manage your assets until your death (unless you have the proper power of attorneys in place). A living trust, however, can go into effect before your death, allowing your successor trustee to manage the trust should you become mentally disabled or incapacitated.
- Avoids probate and maintains your privacy. Unlike a will, a living trust is not required to go through the probate process. Probate records are publicly available, meaning anyone can see the details of your estate. Since a living trust does not require probate, you can use it as a way to protect your privacy.
- Designates times for beneficiaries to receive assets. You can stipulate conditions and timeframes for beneficiaries to receive assets left to them in a living trust.
Do I Still Need a Will if I Have a Living Trust?
Even if you choose a trust-based estate plan, you may need what is commonly known as a “pour-over will.” A pour-over will generally states any assets not already funded in your revocable living trust should go to the trust after you die. A pour-over will is also recommended if you have minor children. A living trust cannot name a guardian, so without a pour-over will, the decision for who would care for your minor children may end up in the hands of the court.
Comparing a Living Trust and a Last Will and Testament
A Living Trust and a Last Will and Testament accomplish similar estate planning goals, but have several differences. The chart below compares some of the key features and differences between a Revocable Living Trust and a Last Will & Testament.
|Revocable Living Trust||Last Will & Testament|
|Reduces taxable estate||Yes||No|
|Stipulate age beneficiary receives inheritance||Yes||No|
|Plans for incapacity||Yes||No|
|Ability to revise document||Yes||Yes|
|Maintains privacy, not a public document||Yes||No|
|Requires retitling/transfer of property||Yes||No|
|Name a guardian for minor children||No||Yes|
|Name an executor||No||Yes|
Remember, not all estate plans are created equal, so consult with your financial advisor to find the best options for your needs. Contact a Fifth Third Bank advisor today to get started.