What Are The Differences Between A Will And A Revocable Living Trust? Which One Should I Use?

Posted on: April 13th, 2012
This is a question that I hear often from my clients.  Some believe that a Revocable Living Trust (“RLT” or “Living Trust”) is something that is only used by the rich and famous and a Will is best for everyone else.  That is not necessarily true.  In fact, I believe an RLT is a better choice over a Will for the following reasons. 

Death Instrument vs. Living Instrument

            I recently had a friend jokingly say, “I’ve got a Will and I’m dying to use it!”  Funny thing is, although he is not dying, he was correct; he will not use it until he dies because a Will is a death instrument.  By this I mean that a Will does not do anything for you until you pass away.  Then, through the probate process, your Will is brought to “life.”  So, think of it this way.  While you are alive, you create a Will.  That Will is “dead” until you die.  Then, through probate (which in Texas can only happen once someone dies), your Will is brought to life. 

            On the other hand, a Living Trust is created and in effect while you are alive.  Upon your death, your successor trustees simply steps into your, now empty trustee shoes, and continues to manage your trust and its assets according to your instructions.

            Because a Will does not take effect until probate, a Will can not contain any instructions on how to manage your estate if you become incapacitated.  If you have a Will based estate plan, and incapacity becomes an issue, your estate will be managed by either your agent under a Durable Power of Attorney, or a Guardian that the court puts in place.

            A Living Trust, however, because it is in effect as soon as you sign it, will continue even if a Grantor is incapacitated.  If this happens, a successor trustee, whom you have previously named, simply steps in and manages the trust according to your instructions. 

            In Texas, probate is not an especially difficult process.  But, it does cost time and money, and can be avoided if an RLT is properly funded. 

Public vs. Private

            Because a Will is subject to probate, it is a public document.  In Texas, part of the probate process is filing an inventory of the estate.  This inventory is also a public document.  This means that if someone wanted to go through the appropriate steps, they could not only find out what your Will said, but also find out what you owned and the value of what was included in your estate. 

            In contrast, if a Living Trust is fully funded (which I will discuss in a later post) there is no need for probate.  Therefore, a Living Trust offers much greater privacy than a Will. 

Miscellaneous Issues

            There are a couple of other advantages of a Living Trust that I would like to point out.  First, if you own property outside of Texas, such as a vacation home in Colorado (or any other state for that matter), you can title your vacation home in the name of your trust and avoid probate in Colorado.  An out of state probate, called an ancillary probate, can be expensive and time consuming, and can be avoided with a Living Trust.

            In addition, if you are concerned about an estate contest from a disgruntled heir, a Living Trust provides a greater chance that the contest will not prevail, and therefore, your plan will remain intact.

One advantage of a Will however, is that typically it may be a little less expensive. 

Thanks for reading.

David

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