Kershaw, Vititoe & Jedinak, PLC | Attorneys And Counselors
Full-Service Lawyers In Monroe, Serving Clients Throughout Michigan
Call Us Today

Should I Make A Will Or A Living Trust?

by | May 18, 2018 | Wills, Trusts And Estates |

Should i make a will or a living trust

If you have committed to making an estate plan, then you have taken the first step in protecting your hard-earned assets for your future beneficiaries. The second step will be deciding what vehicle you want to use to carry out your final wishes. Is it better to make a will or should I make a living trust? What is the difference anyway?

A will is a written document that you sign before two witnesses or a notary public (or both) that spells out how your property will be distributed after your death. In the will, you can appoint the personal representative that will manage your estate and you can appoint a guardian that can care for your minor children when you are gone. It can be amended or revoked at any point during your lifetime. However, the will must be admitted and administered through the probate court to have any legal effect.

A living trust is a legal entity created by a written instrument that takes title to your personal assets for management during your life and after death. During your lifetime, you may serve as your own trustee and you are free to buy, sell, gift and borrow against your assets as if they were still in your name. After your death, a successor trustee nominated by your trust instrument takes your place and follows your written directions in managing or distributing your assets. A living trust can also manage your assets if you are incapacitated by injury or illness. The successor trustee can look after your property on your behalf and for your benefit until you regain capacity to manage your affairs. There is no involvement required by the probate court to carry out trust distributions because the living trust remains a functioning legal entity even after you pass away.

At a minimum, everyone should have a last will and testament. Here are the advantages of creating a will for your estate plan:

  • Wills are relatively inexpensive compared to trusts. Usually, it is a one-time cost to have one created by an attorney and it does not necessarily require updating.
  • Wills can create testamentary trusts that are supervised by the probate court and can do things such as set aside money for your minor children or receive and dictate how life insurance proceeds should be spent.
  • Wills can leave property to any person or any entity, even if they are not related to you. Without a will, your assets would be distributed according to Michigan’s intestate succession laws.

Here are some drawbacks to solely relying on a will for your estate planning:

  • Wills must pass through the probate court to be carried out. The probate court assesses costs and filing fees to initiate administration. The probate court also assesses an inventory fee that must be paid prior to closing administration. The amount of the inventory fee is based on a percentage that is variable on the size of the estate.
  • Probate proceedings take a minimum of five months to complete before the estate can be closed. This time period is necessary due to notice requirements to the heirs, devisees and creditors of the estate.
  • Probate proceedings are matters of public record and any person can go to the probate court and view the file at any time.
  • Probate proceedings are focused on an immediate distribution to heirs and do not typically allow for the estate to be opened indefinitely to manage funds. Although a testamentary trust can be created for more sophisticated final wishes, the testamentary trust is subject to the continuing supervision of the probate court and may require regular court appearances and accountings.
  • Wills can only take effect after your death and do not manage your assets whatsoever during your lifetime. To make estate plans for asset management while your are alive, you would have to create a durable power of attorney, a patient advocate designation or a trust instrument.
  • Wills may not be able to prevent events such as your deliberately disinherited spouse or child taking a homestead allowance, family allowance, exempt property or spousal election from the estate even if it is contrary to your wishes.

A living trust has several advantages over a last will and testament, to wit:

  • Living trusts can be created to be revocable, meaning that you can freely change any terms during your lifetime or revoke the trust outright. The living trust becomes irrevocable after your death and the successor trustee must carry out the wishes in place.
  • Living trusts can manage your property while you are alive as well as in death. If you are sick or injured, the successor trustee can manage your property and pay your bills. You can regain control of your trust once the incapacitating event ends.
  • Living trusts do not have to pass through the probate court and thus avoid expenses against the property to be distributed such as filing fees and the inventory fee.
  • Living trusts are not matters of public record so they can be private and confidential matters handled within the family.
  • Living trusts can be used for wishes more sophisticated than what a last will and testament can provide. For example, a trust can hold money for a beneficiary to be paid only upon certain contingent conditions such as graduating college, getting married or simply reaching a certain age.

However, there are drawbacks to a living trust that you should be aware of:

  • Living trusts are generally much more detailed documents than a will and most estate planning attorneys will charge a significantly higher cost for creation due to the additional work involved.
  • Living trusts must be funded to be effective. This means that property must be titled to the trust, whether it is by deed for real estate or a bill of sale for personal property. Property that is not titled to the living trust before your death may have to be administered through the probate court anyway. This may result in the estate having to pay the costs of both probate administration and trust administration. Living trusts require more active management than a will during your life to achieve maximum effect.
  • Living trusts can be created to facilitate tax planning strategies during your lifetime and after death. However, the Internal Revenue Service treats revocable living trusts as the alter-ego of the settlor and its assets can be subject to the federal estate tax.
  • Living trusts are not immune to be dragged into court. If there are beneficiaries or disinherited heirs that believe that your living trust was the result of mental incapacity or undue influence, or simply that pertinent parts are vague or unclear, then the probate court may have to step in and solve those problems anyway.

Even if you have a living trust, most estate planning attorneys recommend supporting that instrument with a “pour over” will to capture those items that did not properly get titled to the trust during your lifetime. Although a “pour over” will must still be probated, it will ultimately distribute all remaining assets to the trust where the administration may continue.

Contrary to popular opinion, you do not need to be wealthy or have a large estate to have a revocable living trust. Whether it is an appropriate estate planning tool or not depends on the complexity of your final wishes. It is important to get the advice of a skilled and experienced estate planning attorney to determine whether the revocable living trust is a valuable addition or a waste of money. Do not hesitate to contact the estate planning lawyers at Kershaw, Vititoe & Jedinak PLC to see if a living trust is appropriate for your unique situation.

FindLaw Network
Office Building of Kershaw, Vititoe & Jedinak, PLC
Rated By Super Lawyers | Rising Stars | Matt Vititoe |
BBB | Accredited Business | BBB Rating: A+ | Since Aug 2013 | As Of 03/02/20 | Click For Profile | BBB Rating: A+
Rated By Super Lawyers | Rising Stars | Steven T. Jedinak |