Is it Better to Have a Will or a Revocable Living Trust?
Both wills and trusts are effective tools to manage an estate. They perform almost the same function: specifying who gets each of your assets when you die. However, there are some essential differences between the two, and it is important to understand those differences.
What is a Will?
A will is a written document—signed and witnessed in accordance with Oregon law, that indicates how your property will be distributed at the time of your death.
When it comes to costs, wills are usually cheaper to create, but more expensive down the road when beneficiaries have to probate the estate. Probate is a court-supervised procedure for transferring the legal title of your assets after death to your beneficiaries and is an essential difference between a will and a trust. Property bequeathed through a will must go through probate, while trust property is not probated.
Probate proceedings are a matter of public record and the process involves: proving to the court that your will is authentic and valid; appointing a personal representative with authority to act on behalf of the estate; identifying and appraising the property of the estate; paying debts, taxes, and legal fees ; and distributing the remaining property to the beneficiaries in accordance with the will. This process can be difficult and is time consuming, often taking a year or more.
A will is only effective upon death, and, therefore, does not provide assistance for asset management if you become incapacitated.
What Is a Revocable Living Trust?
A Revocable Living Trust (RLT) is a written agreement between the creator of the trust, called the settlor, and a trustee who agrees to hold assets for the trust’s beneficiary(s). Typically, one person is all three: settlor, trustee and beneficiary. The RLT addresses three distinct phases of a settlor’s life: First, the trust makes clear that while the settlor is alive and well, he or she will serve as trustee and manage trust assets for his or her own benefit. Second, if the settlor becomes incapacitated to the extent that he cannot manage his finances, the trust identifies a successor trustee, and directs the successor trustee how to manage trust assets. Third, the trust directs the successor trustee how to distribute remaining trust assets after the settlor dies. The settlor retains all rights to manage and amend or revoke the trust while he or she is alive and legally competent.
While a RLT is more expensive to create than a will, it leaves fewer burdens on a spouse, children or other heirs later. A RLT is not only private, it allows for quicker distribution to the intended beneficiaries, with far fewer administrative costs than the more expensive, public, and time consuming probate process.
When it comes to estate planning, there are no “one size fits all” plans. You should first meet with an attorney and identify what is important to you and your family. Only then will you know whether a will or trust is best for you.
Article Provided by:
Kathy Belcher, 503-371-9636
McGinty & Belcher Attorneys