When creating an estate plan, it’s essential to understand that wills and living trusts are not interchangeable. It’s not a matter of choosing between both options. Only having a will may suffice for some with smaller and easily transferable assets. But first, it’s crucial to comprehend what can happen if you have neither when you die.
Dying without a will or trust in Kentucky is called “intestacy.” Under the state’s intestate succession laws, a judge will determine who gets your possessions during the court-ordered probate process. Courts rely on state laws for distributing property unless you have valid directions in writing. Let’s examine the basics of a will and trust.
Wills
A will is a relatively simple document outlining how you want your belongings transferred after death. In addition to naming your heirs, a will has other functions, including:
- Naming a guardian for young children at home
- Designating an executor to manage your estate
- Providing specific instructions on handling debts and taxes
During probate, the executor inventories your assets, pays off debts and distributes the remainder to your heirs.
Trusts
Living trusts – also known as “revocable” trusts – are similar to wills only in that you can name beneficiaries for assets in the trust, managed by a trustee. You, also called the “grantor,” can name yourself as the trustee of a living trust. One of big differences from a will is that trusts avoid probate, meaning the assets go directly to your heirs. Probate can be a lengthy, costly and stressful process.
You can also place assets in an “irrevocable” trust, which also avoids probate and can protect your assets from taxes, creditors and lawsuits. However, the trade-off is that while you can change a living trust anytime during your lifetime, irrevocable trusts are permanent once signed. Also, you cannot manage the assets but must choose a third party as trustee instead.
Who should have both a will and a trust?
Avoiding probate and intestacy are two primary goals for every estate. However, the best estate plan for your situation depends on many factors. If you have a high-value estate with complex assets, having both a will and a trust may be beneficial. But not everyone needs a trust, which is more expensive than writing a will.
Experienced estate planning attorneys understand how to assess your situation and offer unique solutions based on your circumstances to protect your estate during your lifetime and your heirs after you die. The ultimate goal is to ensure that your assets are efficiently managed and distributed according to your wishes.