Estate Planning: Revocable Living Trust vs. Simple Will

Estate Planning: Revocable Living Trust vs. Simple Will

Estate planning is an essential process that sets forth how assets will be distributed upon death. Two popular options for estate planning are revocable living trusts and simple wills. Understanding the differences can help you make an informed decision based on your personal circumstances and goals.

A simple will is a legal document that outlines how you want your assets to be distributed upon your death. It can also specify guardianship for minor children and address other important matters. A will must go through the probate process, where a court validates the will and oversees the distribution of assets. Several advantages of a simple will include: (a) creating a simple will is usually less expensive than setting up a trust; and (b) a will allows you to specify exactly how and when your assets will be distributed. The disadvantages of a simple will based plan are: (a) the probate process is a time-consuming and expensive process, causing delays in asset distribution; (b) A will becomes a matter of public record during probate, meaning anyone can access its contents; (c) Once a will is executed, any changes require a new will or codicil, which can complicate matters if circumstances change; and (d) opening a probate matter allows anyone to file a claim against the estate, including fraudulent claims.

A revocable living trust (“RLT”) is a legal entity that holds your assets during your lifetime and specifies how they should be managed and distributed after your death. As the grantor, you can amend or revoke the RLT at any time while you are alive. Advantages of the RLT plan are: (a) bypassing the probate process, allowing for quicker distribution of assets to beneficiaries; (b) there is no court involvement and the details of the RLT do not become public record; and (c) you can modify the RLT as your circumstances or wishes change, including adding or removing assets and beneficiaries. Disadvantages of an RLT plan are: (a) establishing a RLT can be more complicated than drafting a will, often requiring more time and legal expertise; (b) the upfront costs associated with creating a RLT are slightly higher than those for a simple will but avoids the expense of the probate process; (c) Assets must be transferred into the RLT, which can involve additional administrative work.

When deciding between a revocable living trust and a simple will, consider the following factors:

1. Asset Complexity: If you have a straightforward estate with few assets, a simple will may suffice. However, if you have a more complex estate, a RLT could offer better management options and tax saving measures.
2.  Privacy Concerns: If maintaining privacy after death is important to you, a RLT may be the better option.
3.  Time and Costs: Consider the time and costs associated with the probate process, as well as the initial setup costs for a RLT.
4.  Future Changes: If you anticipate changes to your estate or family circumstances, a RLT’s flexibility may be beneficial. Ultimately, the best choice depends on your specific situation, goals, and preferences. Consulting with an estate planning attorney can provide valuable insights and guidance tailored to your needs, ensuring that your estate is planned effectively and according to your wishes.