For centuries the “last will and testament” was the standard for estate planning. Since the living revocable trust was introduced, the trust has become pretty much a standard in estate planning. Estates and trusts go together now like estates and wills used to go together.
However, it doesn’t matter how fancy you get with estates and trusts, the will is still a standard part of estate planning. Even if you get a living trust, you will still have a will. It won’t be the “standard will,” because the trust will be the “primary” dispositive vehicle for the estate.
The will used with a living trust is a “pour over will,” because it doesn’t actually dispose of property that passes through the probate process using the will. The pour over will simply “pours” all of the assets passing through the probate process into the living revocable trust for final distribution.
Planning estates and trusts together can avoid probate. The wills (whether the standard will or the pour over will) have to be probated. Wills don’t have any validity until the court, through the probate process, gives them their validity and power.
However, many people trying to put estates and trusts together don’t avoid probate, because the trusts have to be “used” prior to the person’s death and the creation of their testamentary estate.
One misconception about wills, estates and trusts is estate taxes. The trust does NOT have any tax advantages over the will, at least not that 99.99999% of the population will experience. In fact an estate managed by a will and probate has some tax advantages over the estates and trusts management. There again, very, very few people will ever be able to take advantage of the “tax benefits” a will offers.
Just avoid the probate. To do that, you do have to use a living revocable trust. A testamentary trust (a trust created by a will) does not avoid probate and should not be part of people’s estates and trusts planning.
I didn’t realize that trusts had to be used after a death in order to avoid probate; I’ll definitely have to talk to a lawyer about that. My husband and I are planning to put together a trust for our daughter in the event that something happens to us, and we wouldn’t want her to have to go through the probate system to get it, as you said. Having some help knowing what those tax benefits you mentioned are would be great, as well, so we’ll likely be hiring a professional lawyer soon to set up the trust.
Rhianna,
Which state are you in, and is your estate worth over $5 million? That can affect your choices and decisions.