Estate Planning: What are the Differences Between a Living Will and a Revocable Trust
Estate planning is an essential piece of getting your affairs in order. But there are options even in this step. Learn more about the difference between a Living Will and a Revocable Trust.
I never thought much about estate planning until my Mother died. My Father was left to figure out where all his assets were and how much money he had, because my Mom managed the finances in their marriage. In helping my dad get his affairs in order, I got my own affairs in order as well. His attorney recommended a Revocable Trust rather than a Living Will. So, what’s the difference?
An estate consists of all the property and financial resources you own or are in the process of buying such as a house, cars, business property, rental property, retirement accounts, checking accounts, savings accounts, IRA’s and 401k’s, life insurance, and so forth. What you own is an asset, what you still owe money on is a liability. Estate Planning is creating a plan that states what you want to be done with these assets and liabilities while you are sick and then eventually die. The Executor of your Estate will follow your wishes as outlined in a Living Will upon your death. The Successor Trustee will follow your wishes in the event that you are sick and unable to manage the day to day responsibilities of your estate and will also follow your wishes as outlined in a Revocable Trust upon your death.
Choosing between a Revocable Trust or Living Will to finalize your estate planning is to ensure your assets go to those you want to receive them. You may think you don’t have much to give away to your family or children, but you will be surprised when you take the time to look at all you have accomplished so far in your life and how much it is worth, including sentimental value to your loved ones. Also, it gives your family peace of mind and a roadmap to accomplishing your wishes.
A Living Will is a legal document tied to the individual which lists your estate assets and indicates who will be in charge of administering your estate (Estate Executor) after you have passed away. If you don’t have a Living Will or an incomplete list of assets, the State where you live will determine how your assets will be distributed through the court process called Probate. Probate is a legal process handled in Probate Court where the court administers your estate according to your will. However, if you do not have a will, State law will make the determination of what has to go through the Probate Court. This not only is expensive but takes time to work its way through the system. Check with the State you live in to see when Probate is required as it varies from State to State. Whatever goes through Probate becomes public record meaning anyone can see your assets and how the estate was distributed in the end. The Executor of your estate does not get involved in any management of that estate until your death.
Revocable Trusts are “living” trusts. Assets can be transferred into the trust as soon as it is set up. You can retitle your home and make it part of the trust. You can move assets into the trust such as bank accounts, material things you own, investments, etc. You also appoint someone to be in charge of managing the trust who is known as the Successor Trustee and they can start managing should you become incapacitated and/or unable to make decisions for yourself or when you die. They must follow the terms of the Revocable Trust as you outline them when the document is created such as liquidating all property and paying out cash amounts to beneficiaries or other specific directions you include in the trust documents. There are a number of advantages to this document. If you have young children, the trust can be managed until they become of age. Generally, Probate is not required to liquidate and disperse the assets in a Revocable Trust. The Successor Trustee can become involved if illness strikes and you cannot manage it as directed in the Revocable Trust documents as well as upon your death.
5 D's: Death of a love ones, Divorce, Decade (on a "0" year birthday), Diagnosis (new), Decline in physical or mental health
Final thoughts, whatever documents you choose to use, be sure to ask the person you want to be the Executor or the Successor Trustee, if they are willing to do it and also to go over the terms of your documents. These, like Advance Directives, should be notarized when created, reviewed periodically. The best times to review will depend on your age and circumstances. I recommend following the 5 “D’s”: Death of a loved one, Divorce, Decade (on “0” year birthdays), Diagnosis (new), Decline in physical or mental health. Having an estate attorney to guide you can make this a smooth process and ensure you have the best route for your situation and provide legal guidance.
From my own personal experience, when my Father died, having a Revocable Trust was a life saver. I knew exactly what his wishes were, how he wanted his estate liquidated and dispensed and this provided clarity at a very emotional time.
This blog is meant to help guide you and open the conversation for preparing for death. Gentle Passage Doula Collective can help support you and give you assistance to prepare for life’s inevitable end. We are not estate attorneys, but we can connect you with some that are to provide the legal guidance and documents necessary to get your affairs in order. Please reach out to us to start the process, review and/or be present for any family meetings needed.
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