Why Chose A Will-Based Estate Plan Over A Living Revocable Trust?
Both a will-based estate plan and a living trust estate plan also should include a health care proxy with HIPPA authorization and advance directives about end of life planning if that is your choice and a financial power of attorney. Further for the plan to ultimately be useful it needs to be easily accessible when an emergency happens.
There are pros and cons to having a will-based estate plan but for the average American family a will-based plan is suitable and appropriate. Both a trust and a will are legal documents that contain instructions as to how you want your assets managed.
Some factors to consider:
Probate: When you create a living trust, you still need to create a will. It is known as a “pour over “will because rarely do you fully fund the living trust during your lifetime. So, your “pour over” will gives everything you own to your trust. Some argue that having a trust avoids probate the legal process of validating and fulfilling a will but usually the pour over will has to be probated, so those costs and that legal time and effort is not avoided.
Financial costs: it is much less expensive to create a will than a trust. However, there are similar costs in administering or managing a will and trust. The question is when do you want to incur those costs? With a will those legal and management costs occur after you die. With a living trust, those costs incur during your lifetime. There are costs to transfer assets into the trust, such as recording fees for real property and there are also ongoing accounting and tax considerations for a living trust.
Stage of life: if you are young and in the process of building wealth, you undoubtedly want immediate access and control of your assets and would not want them tied up in a living trust, so you would want a will based estate plan. If you are older and have more assets, you may want to fund a trust. Again, it is more work for you during your lifetime.
Privacy: if privacy is a major consideration for you, you would want a trust-based estate plan. Trusts become part of public court records when there is a lawsuit involving the trust or the beneficiaries. A will becomes part of the public court record when it is filed for probate.
Safeguard inheritance: with both a trust and a will you can safeguard your beneficiaries’ inheritance. Again, the factor here is timing. With a will, you can create a testamentary trust to protect your beneficiaries upon your death. A living trust can protect its beneficiaries during your lifetime.
Based on the above factors, most Americans chose a will-based estate plan.
Please note that this article is not comparing a will to an irrevocable trust plan that is used for protecting assets so that the government pays for long term care in a skilled nursing facility.