How Is a Living Trust Different from a Last Will?

Living trusts are increasingly popular, largely because they help heirs avoid the expensive and time-consuming probate process.  For estate planning purposes, they are generally combined with a pour-over will, and this combination is used as an alternative to a standalone last will document.

What Is the Process When a Traditional Last Will Is Used?

A last will document (or last will and testament) serves a very specific purpose: legally declaring what you want done with your belongings (and your remains) after you die.  The principal (the person whose estate is in question) must include several important details in their will, particularly naming an executor for their estate – a person responsible for seeing to it that all of their wishes are implemented. 

The executor files for probate in court, publicly declaring all of the deceased’s (the principal’s) assets and to whom they will be going.  Probate is expensive, time-consuming and all of the estate’s details go onto public record (read more about What Is Probate?).

Wills often include details on the principal’s funeral wishes, and who is to assume legal guardianship of minor children, if the principal has children under 18.

What Is a Living Trust, and What Are Its Advantages?

A living trust is a document that puts some or all of a person’s assets into a “trust” and sets a “trustee” (an administrator, who serves the same purpose as a will’s executor) who will be responsible for distributing the various assets like cars, houses and the like to whomever the original owner wanted.  It is very similar to a will in this way, although the terminology is different, because assets held in the trust do not go through probate.

Trusts generally do not include information about funeral or burial wishes, but they can include a pour-over will that does.

By way of example, John creates a living trust, and a pour-over will that states that all of his assets will go into the trust upon his death.  He sets his oldest daughter Martha as the trustee, who will be in charge of making sure that John’s assets are distributed to the people John wanted.

In his pour-over will, he also states that his 15 year-old son is to go into the care of his sister until he reaches 18.  John also states that he wants his remains cremated and spread into his favorite fishing creek, and where he wants his funeral to be held.

The trustee, Martha, does not need to go to court or deal with probate (for assets properly placed into the trust before the principal died).  She does not need to pay probate expenses, and does not need to publicly record the estate’s assets, the heirs or bequests.  She does need to re-title real estate holdings into the trust, however.

Living Trust versus Last WillProbate is particularly inconvenient when the principal owns real estate in different states, because the executor must then go through probate in each state where real estate is located. 

A further benefit of a living trust is that it can go into effect while the principal is still alive, in the event that they become incapacitated.  For example, John owns a business, so he outlines specific procedures that are to take place if he were to die or become incapacitated.

Are There Any Benefits to a Will over a Living Trust?

The larger your estate, the more it makes sense to use a combination living trust and pour-over will rather than a standalone will.  But smaller, simpler estates may find it easier to use a last will document by itself, for a few reasons.

One advantage of probate is that it limits the amount of time that creditors can bring claims against an estate.  Perhaps your heirs will get lucky and a creditor will fail to file their claim in the available time window, but don’t count on it.

Another advantage to using a standalone will is that real estate can transfer directly from the deceased principal to their heir(s), without a change in title to a trust first.  While transferring title can be done inexpensively with a quitclaim deed, it still costs transfer taxes, which can be substantial.  So only having to change the title once, rather than twice, can save both money and headaches for your heirs.

So, a Will or a Combined Living Trust and Pour-Over Will?

Both will successfully transfer your assets where you want them to go upon your death, and will leave an orderly plan rather than a chaotic mess when you die.  It’s ultimately more important that you have a legal estate plan, that is up to date when you die, than choosing one or the other. 

Still, someone with a complex estate that includes homes in several states, multiple vehicles, business holdings and the like should consider using a living trust and pour-over will.  Someone with only a few assets is probably just as well with a standalone last will. 

Remember that you can always change your mind later, and import your will information into a living trust on our website.  If you have only a few assets now, start with a will, and when you come back to update your will and assets in a few years, consider importing the information over to a living trust.

Related Reading:

Intestate: How Dying without a Will Creates a Family Legal Nightmare

Glossary of Estate Planning Terms, from Probate to Power of Attorney

How Is a Living Will Different from a Living Trust?