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Deciding how to leave behind your financial legacy can be complex and confusing, as there are many different ways to distribute assets after an individual has passed on. Two of the most commonly used written legal documents are wills and revocable living trusts. But which one is right for you? At Jorgensen, Brownell & Pepin, our Colorado estate planning lawyers have helped many clients to create a stable financial plan that will protect their best interests and reduce the potential for dispute. In this post, we’ll discuss some of the key advantages and disadvantages that come with each document.
Major Distinctions Between a Living Trust and a Will
While many people use the terms “trust” and “will” interchangeably, they are fundamentally different documents that require very different approaches. Both living trusts and wills can help you determine beneficiaries for your property. But for the most part, that is where the similarities end.
Although there are many kinds of trust, a revocable living trust is the most frequently used, because it can be continually revised and changed throughout your life (in contrast to an irrevocable living trust, which is permanent.) This type of living trust creates an agreement between parties, one that actually goes into effect at the time of signing. Then, any property you would like to leave for beneficiaries is transferred into the trust’s ownership, and the person you have designated to manage your trust is called the “trustee.” Living trusts require a substantial amount of paperwork and time to implement, but you may decrease the risk of a dispute after your death.
A living trust can be a better option if any of the following apply to your situation:
- You need to avoid probate or prevent major disputes about your intentions.
- You need to avoid a conservatorship, and would like your designated trustee to take over financial matters and affairs if you become incapacitated.
- You would like your estate and financial matters to remain private.
- You have children under the age of 18, who will not be able to own property and would need a trustee to represent them fairly.
Last wills and testaments, on the other hand, are quite simple to create and do not represent a legal transfer of property at the time of signing. It only goes into effect once you die. A will can cover some final wishes not included in a living trust, like naming a legal guardian for your child once you have passed on – but because these merely represent your legally documented wishes, a will can be subject to the probate process and to court challenges. Unlike a living trust, a will becomes a matter of public record once it goes through probate.
A will can provide the following benefits over a trust, and might be worth considering if these apply to you:
- You do not have many assets to distribute.
- You would like to name an official guardian for your young child.
- You want to discuss final wishes and funeral instructions.
- You are the sole owner of most of your properties.
- You want to address any taxes, debts, and loan forgiveness.
Should I Use Both a Living Trust & a Will?
In many cases, it’s advisable to use both a will and a living trust to denote your last wishes. This is due to the fact that there are so many differences in the two documents. For instance, if you have significant debts and specific final wishes, you may want to address them in a will. But if you want to avoid a conservatorship at any cost, it’s best to create a living trust too, so that you can name a trusted person to manage your affairs.
At Jorgensen, Brownell & Pepin, P.C., we know that estate planning is always complex and time-consuming. That’s why our dedicated Colorado estate planning lawyers are here to help you decide which document is right for you, and to weigh the pros and cons for your unique situation.
Ready to start discussing your financial future? Contact us today to speak with one of our skilled attorneys.