-
Summary
of Advantages to Using a Will
-
Summary
of Advantages to Using a Revocable Living Trust
-
Issues
Having No Obvious Advantage between Using a Will vs. a
Revocable Living Trust
-
Obtaining
"The Best of Both Worlds"
| Issue |
Will |
Revocable
Living Trust |
| During
Life: |
|
|
| Cost
to implement |
Modest:
only to prepare a Will |
Greater:
to prepare both a Will and a Trust; to transfer all
assets to Trust; and to educate Trustor(s) re Trust
management |
| Cost
to administer |
Nothing
to administer until death |
Usually
little more than if property held individually |
| Lifetime
asset management |
Will
effective only at death (although lifetime asset
management should be possible through a Durable Power of
Attorney for Assets) |
Trust
can include asset management upon disability and
avoidance of appointment of guardian of estate |
| Property
Character Retention during Marriage |
Relatively
easy to commingle spouses' property, both among spouses
and between their respective separate and community
property |
Easy
to maintain each spouses' separate property by keeping
it in separate trusts |
| Ability
to change the terms |
Easy,
by executing a new Will or a Codicil |
Easy,
by executing an Amendment to Trust |
| Income
tax advantages |
Comparable |
All
income tax attributes flow through the Trust and are
reported by Trustor(s), as if the Trust didn't exist |
| Time
bomb |
None |
Property
acquired after Trust created and never transferred to
Trust, requiring a probate proceeding just for that
asset |
| |
|
|
| At
Death: |
|
|
| Necessity
of probate proceeding |
Requires
probate proceeding for Will to take effect and property
to pass according to its terms |
Takes
effect at death without necessity of probate proceeding
for all property held by trust |
| Real
property in another state |
Requires
"ancillary" probate proceeding in that state
to clear title |
No
ancillary probate proceeding required so long as all
property held by Trust |
| Expenses
at death |
Can
be large if probate necessary, especially in state (eg,
California) providing substantial professional
commissions and fees |
Usually
substantially less, due to avoidance of probate &
possible excessive professional commissions and fees |
| Privacy |
Probate
proceeding, including contents of Will, are public |
Trust
administration is private |
| Disgruntled
Heirs & Beneficiaries' Potential for Contest |
Will's
terms are public, and a Will contest is relatively easy
and inexpensive to file following initiation of probate
proceeding, although it must be filed within 4 months of
admission of the Will |
Beneficiaries
are not entitled to disclosure of Trust's terms except
as to their individual interest, and Trust contest would
have to be initiated by them at their expense, but no
comparable Statute of Limitations |
| Income
tax advantages |
Probate
estate is a separate taxpayer for income tax purposes,
so some income tax advantages may be possible |
While
living trust following death also qualifies as a
separate taxpayer, it is more difficult to justify
keeping the post-death administration of a Trust open in
order to obtain any income tax advantages |
| Death
tax advantages |
Comparable |
Comparable |
| Debtor/creditor
advantages |
Comparable
due to ability to publish Notice to Creditors as regards
either probate or non-probate assets |
Comparable |
| Delays
following death |
Some
time necessary to initiate and settle probate proceeding |
No
interaction with Court necessary, so delays and
deadlines due to Court aren't relevant |
| Interruptions
resulting from death |
Interruptions
possible due to Court intervention (eg, obtaining
ongoing funds, running a business) |
No
interaction with Court necessary, so interruptions due
to Court aren't relevant |
|
"Nonroutine
transactions"
|
Personal
representatives are not subject to "nonroutine
transaction" requirements |
Trustees
are so subject, requiring them to notify Beneficiaries
before undertaking any "nonroutine
transactions" |
| Causes
of action by or against a Decedent |
Can
be brought or defended only by a Personal Representative |
Decedent's
Trustee lacks comparable authority |
| Court
Accountings |
If
Will itself establishes trusts after death
("testamentary" trusts), then their Trustee
may be required to account to the Court annually for the
trusts |
No
Court accounting necessary |
Summary
of Advantages to Using a Will:
-
During
Life:
-
Easier
and cheaper to prepare.
-
Avoids
the necessity of transferring all your existing and
after-acquired property to a Trust.
-
More
convenient:
-
Has
no effect until death;
-
Avoids
Trust management problems; and
-
You
can continue to hold and manage your property just
like you always have.
-
At
Death:
-
A
neutral, third-party (a Judge) is available who can
supervise the process, ensure that it is proceeding
according to law, and resolve any disputes (eg,
among your Beneficiaries, between them and the Personal
Representative, or regarding title to property or
legitimacy of debt).
-
An
objective process is available that extinguishes claims
against you and your estate that is quick and fair to
debtors, creditors, and your Beneficiaries.
-
Only
a Personal Representative can bring or defend a lawsuit
on your behalf.
-
In
Washington, because of its liberal, consumer-oriented
probate laws, the probate process can be remarkably
simple, quick, efficient, and inexpensive.
-
Avoids
Trust "Time Bomb" problem, the possibility
that a probate will be needed despite having a Trust.
Summary
of Advantages to Using a Revocable Living Trust:
-
During
Life:
-
Can
provide for asset management upon disability, possibly
avoiding the appointment of a Guardian for your Estate
(although with a Will, that appointment might not be
needed through the use of a Durable Power of Attorney
for Assets).
-
Easier
to keep spouses' property separate and to maintain its
non-community character.
-
At
Death:
-
Avoids
the necessity of a probate proceeding in your home state
so long as none of your property remains titled in your
name.
-
Avoids
the necessity of a probate proceeding in any other state
in which you own real property so long as that property
is titled in the name of your Trust.
-
Quicker
and less expensive, especially if you are a resident of
a state (eg, California) that provides for:
-
A
more formal probate process,
-
"Statutory"
probate commissions and fees based on the value of
the assets in your probate estate,
-
A
Court filing fee also based on the value of the
assets in your probate estate.
-
Your
estate plan and the administration of your estate are
not made public.
-
Your
Beneficiaries are not entitled to disclosure of your
estate plans except as it pertains expressly to them.
-
Reduced
likelihood for a contest over your estate plan, due to
increased privacy and expense of a contest.
Issues
Having No Obvious Advantage between Using a Will vs. a Revocable
Living Trust:
|
Income
or Estate Tax Savings
|
Obtaining
"The Best of Both Worlds"
The
situation is not really as "black and white" as
presented. In practice, anyone using a Revocable Living
Trust as the vehicle for his/her estate planning will likely
(and should) have a Will as well, among other things, to provide
for situations that only a Will may provide, such as:
-
Appointment
of a list of Personal Representatives in priority order, in
case a probate proceeding might be necessary or advantageous
for some reason even upon the use of a Revocable Living
Trust as one's primary estate planning vehicle.
-
Appointment
of a list of Guardians in priority order, perhaps even
separate lists for Guardians of the Person and Guardians of
the Estate, for any minor children.
-
Appointment
of property subject to a Testamentary Power of Appointment.
-
Gifts
of tangible personal property by a separate writing, not
subject to their being made according to Will formalities.
The
Will used with a Revocable Living Trust is known as
"Pour-Over" Will. A Pour-Over Will will:
-
Contain
any of relevant provisions above and
-
Provide
that any property held at death by the Decedent/Trustor (ie,
property that escaped being transferred into Decedent's
Living Trust during life) to now be transferred (ie,
"poured-over") into Decedent's Living Trust at
death (technically, be transferred from Decedent's Personal
Representative to Decedent's Trustee).
Practically
speaking, you now see that in creating and implementing one's
estate plans, the issue is:
-
Not
so much "Should I have a Will or a Living
Trust?"
-
As
"Given that I should have a Will under any
circumstance, should I also have a Living Trust as
well?"
Bottom-line:
Query:
What is the best vehicle to use to support one's estate plans?
A Will? A Revocable Living Trust? Or???
|
There
is no "right answer."
One
size does not "fit all."
It
all depends on:
Who
you are,
Where
you live,
What
you have,
What
you want,
Etc.,
Etc., Etc.
The
Choice Is Yours
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ESTATE PLANNING