Wills vs. Living Trusts*
|
Wills |
Living Trusts |
1. Cost |
$100.00 to $600.00 |
$1,500 and up + Maintenance |
2. Drafting |
Easier |
Harder |
3. Funding |
Easy |
Hard with multiple traps |
4. Amending |
Harder |
Easier |
5. Monitoring |
N.A. |
Annually |
6. Avoiding Probate |
N.A. |
Only for assets transferred or funded to the trust; a stand-by or pour-over will may still need to be probated |
7. Avoiding Disability |
N.A. |
Better than a springing power-of-attorney |
8. Avoiding public disclosure |
None |
Yes, but disclosure required in most transactions and a stand-by will may need to be probated |
9. Avoiding Contest |
Possible |
Less possible |
10. Income tax |
N.A. |
May need to file Form 1041 and many complications if the trustee is not the grantor*** |
11. Estate tax protection |
None |
None |
12. Homestead Protection |
Yes |
None |
13. Homestead tax exemption |
Yes |
Yes |
14. Protection from creditors |
None |
None |
15. Divorce |
Automatic deletion of ex-spouse as a beneficiary |
No effect |
16. Title Insurance |
N.A. |
An owner's title policy will not transfer. Therefore, the trust is not an insured under the policy. |
* assumes a revocable inter vivos trust in which the grantors, husband and wife, are the trustees
** This chart was abstracted from a paper prepared by Robert N. Virden, Attorney at Law and Board Certified, Estate Planning and Probate Law, Board of Legal Specialization (1978) and presented to the North Texas Estate Planning Council and a paper prepared by Gerry W. Beyer, Professor of Law, St. Mary's University School of Law.
*** The transfer of an IRA or other "qualified" investments into a Living Trust is a taxable event causing the income tax that has not been paid due and payable in the year of transfer.
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