Wills and revocable living trusts are both legal documents that are used to communicate a person’s wishes and direct how to distribute assets upon death. A Will takes effect only after a person dies and is subject to probate. A trust becomes effective immediately and the assets in the trust are not subject to probate. Generally, a Will is simpler and less expensive to create upfront while a trust is more costly to set up initially but may save money at the end by avoiding probate fees.
What is a Will?
A Will is a relatively simple estate planning document that provides a distribution plan and nominates a personal representative to administer the deceased’s estate. When properly crafted, a Will clearly explains what is to be done with personal property (home, car, jewelry, artwork, etc.), as well as financial assets (savings accounts, investment accounts, retirement accounts, etc.). If there are young children, a Will should appoint a guardian who will take care of the children’s needs until they reach adulthood. A Will is often sufficient for simpler estates, especially if naming a guardian for minor children is a primary concern.
In most cases, probate is necessary in Wisconsin if the decedent has assets totaling $50,000 or more in value that did not pass to beneficiaries or by other types of transfers such as by joint ownership or from a trust. Probate is a court-supervised procedure for transferring ownership of someone’s assets after he or she dies. This process validates the person’s Will and distributes property as the Will directs. If the decedent left no Will or other legal arrangement for transferring assets upon death, the estate may still have to go through probate.
The goal of probate is to protect the interests of beneficiaries and those who have claims against the estate. During the probate process outstanding debts or taxes are paid, disputes over inheritances are settled and assets are transferred to beneficiaries.
What happens if there is no Will?
If a person dies without a Will, state statutes determine how a person’s assets are distributed. In most states, the surviving spouse or the closest living relative(s) will inherit everything, but this is not always the case. That is why it is important to have a Will and to make sure it is updated whenever family or financial circumstances change.
How does a revocable living trust work?
As the name suggests, a revocable living trust is a legal document that goes into effect while a person is still alive. The grantor transfer assets to the trust and the grantor generally acts as the trustee of the trust. In some cases, a third party acts as the trustee, such as if the grantor becomes incapacitated or when the grantor dies. The trustee manages the assets in the trust according to the grantor’s instructions and then oversees the distribution of the assets after the death of the grantor. What makes a trust different from a Will, however, is that the trust can continue to operate even after the grantor is gone. This distinction can be especially helpful for parents of a child with special needs or wealthy parents who want their children to receive their inheritance gradually or perhaps at a specific age (say, their 30th birthday). A “pour-over will” is often used alongside a trust to ensure any assets not in the trust are transferred into it upon the grantor’s death.
Are there any other reasons to use a revocable living trust?
Revocable living trusts are also important because they help avoid what can sometimes be a long and costly probate process. Since the assets in a trust do not have to go through probate, it can be a much quicker and easier way to transfer wealth to heirs. A trust is ideal for larger or more complex estates, or if the grantor prioritizes privacy, wants to avoid probate, has beneficiaries with special needs, or wishes to control how assets are distributed over time.
Either a Will or a revocable living trust helps ensure that the decision about the distribution of the deceased’s assets is not left up to the state. Once a Will or a revocable living trust in place, a person can rest assured that their final wishes will be carried out and that they helped make this difficult time a little easier for loved ones.