A Will Trust and a Living Trust are both estate planning tools, but they serve different purposes and work in distinct ways. Here's a breakdown of the key differences:
Living Trust (also known as an Inter Vivos Trust):
- Created during your lifetime: A living trust is set up and goes into effect while you are still alive.
- Avoids Probate: One of the main advantages of a living trust is that it allows your assets to bypass the probate process after you die. This can save time and costs associated with probate, as well as keep your affairs private.
- Management during Incapacity: If you become incapacitated, a living trust allows a successor trustee (who you’ve appointed) to manage your assets without the need for court intervention, ensuring smooth handling of your affairs.
- Revocable or Irrevocable: Living trusts are typically revocable, meaning you can make changes to the trust or dissolve it entirely during your lifetime. Some living trusts can also be irrevocable, which means once created, they cannot be changed.
- Privacy: Because a living trust doesn't go through probate, the details of the trust, including asset distribution, remain private.
Will Trust:
- Created upon death: A will trust, on the other hand, is usually a provision in a will that outlines how certain assets should be handled after death. It doesn’t come into effect until after your death and the probate process begins.
- Subject to Probate: The assets in a will trust must go through the probate process before being distributed to beneficiaries. Probate can be a lengthy and expensive process, which is one of the main disadvantages of a will trust.
- No Incapacity Protection: Unlike a living trust, a will trust doesn’t offer a way to manage your affairs if you become incapacitated, as it only activates after death.
- Can Include Trusts for Minors or Special Purposes: A will trust often includes provisions for children, such as creating a trust fund for minors or establishing a trust for someone with special needs, which can manage how and when the assets are distributed.
Key Differences:
- Activation: A living trust operates while you're alive and can help manage your assets if you're incapacitated. A will trust comes into play only after your death.
- Probate: Living trusts avoid probate, whereas assets in a will trust are subject to probate.
- Incapacity: A living trust handles your affairs in case of incapacity, whereas a will trust doesn’t offer that benefit.
- Privacy: A living trust keeps asset distribution private; a will trust becomes a public document through probate.
Would you like to dive into one of these options in more detail or see which might be right for your situation?
