Pros and Cons of Living Trusts vs. Wills
Every adult, whether wealthy or not, should have a will or a living trust so that they can make clear how they want their estate distributed when they die. There are pros and cons to using a living trust versus a will.
If you have a will, it must go through probate when you die. That means your named executor or one of your family members will file your will in the Register of Wills in the county where you lived. The executor you named begins to “settle” the estate. The executor will take control of your property, pay your outstanding debts, collect any debts owed to you and pay any taxes due. After those steps, the executor distributes the remaining assets of your estate to the beneficiaries named in the will according to its terms.
In Pennsylvania, probating most estates is not too expensive. However, the process can take several months. If a beneficiary cannot be located or if someone contests the will, probate could be longer and costlier.
A living trust is an alternative or supplement to a will. It is created by drafting a trust agreement and transferring assets to the trust. The trust becomes the owner of the assets. The trust agreement names a trustee. That can be yourself during your lifetime. The trust agreement also names a successor trustee to manage the trust if you become incapacitated or die. The agreement also names the beneficiaries who will receive the trust’s assets according to its terms.
There are clear benefits of a living trust. Assets owned by the trust are not part of your estate and so do not have to be probated. The successor trustee simply distributes the trust assets as directed by the trust agreement.
A living trust also offers privacy. Probate is a public proceeding. Not so with a trust. No one other than the successor trustee and the beneficiaries knows about your property transfers. This reduces the possibility of contests being raised.
But a living trust has drawbacks. You cannot name a guardian for your children if both you and your spouse die. You can do that in a will.
Also, when you set up the trust, you have to re-title all the assets in the trust’s name. This is also true for any property you later wish to be included in the trust. Reviewing and revising the trust over time can be expensive.
Actually, it’s a good idea to have both a will and a living trust. That way, any of your assets not included in the trust are “poured over” into the will and distributed according to your wishes.
Whether you need a will or a living trust or both, Matthew R. Zatko, Attorney at Law can provide the assistance you need. Call today at 814-483-7075 or contact me online to schedule a consultation at my Somerset office.