When planning your estate, one of the first questions you need to answer is whether you need a will or a revocable living trust. Ask 10 estate planning attorneys, and you’re likely to get an even split on the answer. Truth be told, the will vs. trust question is a personal choice. Each instrument has distinct advantages and disadvantages, and your situation is unique.
To help you decide, let’s take a look at the differences between a will and a revocable living trust. While both documents serve to lay out your wishes for how your estate will be distributed, they differ in several key aspects: timing, flexibility, and probate requirements.
Timing
The first is timing. A will doesn’t take effect until you die. On the other hand, a revocable living trust is in effect as soon as you execute and fund it. So, you can start managing your assets through your trust right away.
Flexibility
Second, a revocable living trust offers you more flexibility in how you structure your estate. Instead of an inheritance paying out in one lump sum, you can stipulate how and when disbursements get distributed. So, you can condition the inheritance on your heir getting married, earning a college degree, or not doing those things. It’s pretty wide open.
If you’re concerned that your heir won’t be responsible for the money you spent your life earning, you can have someone else manage the inheritance to be sure it’s properly invested and managed.
A revocable living trust also eliminates the need for a conservator if your heir is a minor.
Privacy
Third, a revocable living trust avoids probate. This is the main selling point for going this route for many.
Probate is a legal process where the court distributes your assets according to your will or Colorado’s intestate laws if you die without a will. As you can imagine, probate can take time and be expensive (and therefore lucrative for the attorney you’re paying to handle the probate). A revocable living trust allows for the distribution of your estate sooner and cheaper.
Another advantage of avoiding probate is privacy. Your will must be filed with the court within 10 days of your death in Colorado. At that point, it becomes a public record. That means anyone can see what assets you owned and who received them. A properly funded revocable living trust keeps that information out of the public eye and has the added benefit of removing the government from the process.
Additionally, you can add provisions to your trust allowing a successor trustee to take over management of the trust’s assets if you become incapacitated.
Price
One last thing to note is the cost. Wills are usually cheaper than a revocable living trust and less complex. But keep in mind that the higher price and initial complexity of a revocable living trust are generally offset by its ability to avoid probate. And did I mention your family won’t have to deal with the government in that difficult time after your death? But to avoid probate, you must make sure to properly maintain your trust while you’re alive.
Since everyone is in a different situation, there’s no one-size-fits-all approach to estate planning. You may think you have a simple estate, and you may, but you should talk to an experienced estate planner to make sure you have covered all your bases.