Should you have a living trust or a will?
Benefits exist for both a will-based estate plan and a trust-based plan. From a cost standpoint, usually a trust-based plan – where the assets are truly coordinated with the trusts – are less expensive, but both kinds of plans do have expenses after death.
Usually, a will-based trust is twice as expensive to settle as a living trust, but a living trust is more expensive to set up.
A living trust has more provisions for care and disability, and often is more difficult to challenge, because a trust is a contract. When potential heirs would challenge a trust at death, they have to show undue influence or duress in the contract formation or terms in order to undermine it.
In a will-based plan, there are many other rules by which heirs or potential interlopers could challenge the will under the terms of the probate code in a state.
A living trust-based plan that is funded is typically more secure than a will-based plan where the terms of the will can be challenged.
Wills are only effective at death. The probate code does cut off creditor rights in a way that a trust cannot, so there are benefits of having a will-based plan. A blend of a will-based plan and a living trust-based plan might be best for purposes of cutting off creditor rights in a situation where, for example, an active business entrepreneur has potential liabilities and/or has the kind of business where liabilities could pop up unexpectedly.
For single people, the primary benefit of a trust-based plan is that specific instructions for care and disability can be included. Those types of instructions would also benefit a widow or widower whose children are not close and don’t really know how she/he wants to be cared for if disability were to unexpectedly occur.
When a trust is funded after death, it would thereafter be equally managed and distributed regardless of whether the terms originated in the trust or the will.