Living Trust or Simple Will: Which Do You Need?

Estate Planning, put simply, is the process of arranging onea??s affairs for when they pass away. This can usually be accomplished through the use of living trusts and wills. To most, the concept of estate planning sounds relatively straightforward. You probably feel that you should dictate how and to whom your assets are distributed after you pass away, with little concern for any other issues that may arise.

The reality of estate planning, however, is not always so simple. There are a number of factors to consider when preparing an estate plan, including, but by no means limited to, the following:

The value and types of your assets
Your current and future income
Your distribution desires
Your mental and physical condition
Other objectives, such as leaving a legacy, providing for a charity, taking care of your children or grand-children, or proving for someone with special needs

The most common estate planning instruments are wills and living trusts. There is a common misconception about the need to have a living trust. Many assume that they only need a simple will to best take care of their affairs when they pass away, and that only the wealthy need to have a trust. While this may be true in some instances, it often also leads to unexpected results.

Wills

A will is a document that lists how you would like your estate and affairs handled upon your death. The process by which this is accomplished is called probate, which is when a will is submitted to a court for administration after your death. The executor of the will, usually a person named in the will, is responsible for managing the affairs of the estate as it progresses through probate. The court will oversee your estate, payment of your outstanding obligations, and distribution of your assets according to the terms of your will. This process typically takes a number of months at a minimum to complete, usually involves your executor having to hire an attorney to handle the entire process, and is quite expensive for the estate. Further, since your will is submitted to the court, it becomes a public record for the entire world to see, which is problematic for those who desire a sense of privacy over their financial affairs.