Comparison of a Will to a Revocable Living Trust | My Estate Plan

Comparison of a Will to a Revocable Living Trust | My Estate Plan (2)

 

Should I Use a Will, or a Revocable Living Trust Based Estate Plan?  

Part 2

 

What is the Purpose of Estate Planning?

 

To pick up from where we left off in Part 1, here is what we are comparing with Wills and Living Trusts. 

Part 1 of this Blog covers reasons A and B.  Part 2 covers C and D.

Let’s look at these reasons and compare Wills and Revocable Living Trusts

  1. To manage and control your property while you are alive and well.
  2. To provide for ourselves and those who depend on us in the event that we lose capacity
  3. To give what we want to whom we want
  4. To minimize professional fees, costs, court costs, and the like.

 

 

C. How is a Will Different than a Revocable Living Trust in How Property is Distributed?

 So, with an Estate Plan, there are basically two ways property can be distributed.  The distribution can be outright, or in Trust.

 

An outright gift offers no means of control.  Therefore, an outright gift offers no opportunity for potential protection from creditors, predators, divorce, tax, or even from the beneficiary him or herself.  A Will only allows for a distribution via an outright gift, or via a Testamentary Trust.  A Testamentary Trust is created when the Will “speaks” (upon the death of the Testator) and creates this Trust to distribute the gift.  So technically speaking the only way property is distributed purely via a Will is outright, otherwise the distribution is achieved via a Trust.

 

Most Wills in California must be Probated, which is costly and time consuming.  Please see my blog under “Probate” which discusses the process in some detail. 

So if some control over the gift is desirable, and costs are to be managed, a Revocable Living Trust is a better estate planning method.  Also, please see my Blog for more information on protecting the inheritance of the beneficiary.

 

 

D.  How are Costs Best Managed - With a Will, or a Revocable Living Trust?

In order to best control professional fees, costs, and other expenses, we need to look at the entire estate, and discuss what is the best method of planning the estate.  A Will alone will be less expensive to create than a full Revocable Living Trust plan with ancillary documents, but that does not mean that it is best, or that it will cost less in the long run.  Some people think that because a Living Trust needs to be funded, that it costs more than a Will centered Estate Plan with ancillary documents, but this is also not necessarily true.  Even with a Will centered plan, titles of various property must still be managed in order to lessen fees and costs. 

 

See lots of estate planning information on my website at: www.myestate-plan.com

 

It is for all of the reasons discussed here and in my other Blogs that the Revocable Living Trust centered Estate Plan is a superior method of planning the estate. 

 

Call me today and let’s start planning!  Thanks for reading.

 

William “Dan” Powell

San Diego, CA

619-980-2297

 

 

****Reminder****

Just like my website, nothing in this blog is intended as legal advice. If you need legal advice, contact an attorney licensed to practice in your jurisdiction. I am licensed to practice law in California.  Further, please remember that I speak in generalities in my blog (and on my website). There are so many different factors that can contribute and completely change the outcome that it would not be practical to discuss all of them here. This is why I speak in generalities. Thanks again for reading.

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This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information.

 

 

 

Should I Use a Will, or Revocable Living Trust Based Estate Plan?

Part 1

What is the Purpose of Estate Planning?

First, let’s quickly look at some of the purposes of Estate Planning.  As I have discussed on my website and various other blog posts, the main advantages to estate planning is to best manage and control your property while you are alive and well.  Another advantage is to provide for ourselves and those who depend on us in the event that we lose capacity from such causes as a coma, or a loss of mental capacity such as Alzheimer’s.  The next reason is the one with which we are perhaps most familiar – to give what we want to whom we want, and in doing so we hope to promote harmony, enhance the lives, and protect those we choose to be beneficiaries.  Finally, another big reason is that through proper Estate Planning we hope to minimize professional fees, costs, court costs, and the like.

 

Part 1 of this Blog covers reasons A and B.  Part 2 covers C and D.

Let’s look at these reasons and compare Wills and Revocable Living Trusts

  1. To manage and control your property while you are alive and well.
  2. To provide for ourselves and those who depend on us in the event that we lose capacity
  3. To give what we want to whom we want
  4. To minimize professional fees, costs, court costs, and the like.

 

A.  What Does a Will do to Help Me Control My Property While I'm Alive?

The short answer to this question is – nothing.  A Will, by itself, does not help you control your property while you are alive because a Will “speaks on death”.  This is so because a Will only becomes effective at death.  When a Revocable Living Trust is used and property is put into the Trust, the Trustee, or successor Trustee can deal with the property.  More on this later.

 

 

B. How is a Will and a Revocable Living Trust Different if I Lose Mental Capacity?

 

Because a Will only “speaks on death”, it does nothing by itself to help you manage your property.  With proper ancillary documents, we can provide some solutions, but there are drawbacks.  A Power of Attorney can be used to allow another to deal with your property should you lose capacity. Keep in mind that a Power of Attorney is a very powerful document and it requires careful thought and consideration before being entered into. 

 

 

Advance Health Care Directive, Power of Attorney, and HIPPA

 

With a Power of Attorney, there are basically two types – springing and durable. A Durable Power of Attorney becomes effective immediately upon execution and allows the person you name as the Agent to deal with your property – buy, sell, enter into contracts – as if the Agent were you. So you can see why many people are reluctant to use this type of Power of Attorney.  The other type of Power of Attorney is a Springing Power of Attorney.  This type becomes effective upon the Principal’s incapacity.  This is why some people choose this type of Power of Attorney.  But in order to exercise the authority granted under a Springing Power of Attorney, incapacity must be established and this is most easily achieved with additional documents.  The two additional documents are and Advance Healthcare Directive, and a HIPPA Authorization or HIPPA Release.  By statute, an Agent under an Advance Healthcare Directive has access to the Principal’s medical records, but the Principal must be incapacitated.  Incapacity is easily shown in the medical records.  What a Catch-22!  Thus, the HIPPA Release allows the Agent under the Advance Healthcare Directive to view the medical records. 

 

 

Drawbacks of Will Based Estate Plans and Management of Property During Incapacity

 

The major disadvantages to using a Will, Advance Healthcare Directive (sometimes called a Living Will), HIPPA Release, and Power of Attorney to manage your property in the event you lose capacity is that often times third parties are reluctant to accept a Power of Attorney, especially if it is an older document.  What makes a Power of Attorney “old” varies with the situation, but 2 years old can be all that is required to make third parties reluctant to accept the Power of Attorney.  If the incapacity is long-term, the Principal may end up in a guardianship which is akin to a “living probate”. 

 

Another drawback to this type of Will based Estate Planning is that it lacks guidance and direction from you on how your affairs are to be handled.  In fact, the Agent under a Durable Power of Attorney has a fiduciary duty to the Principal to only care for the Principal, and disregard those that may have been relying on the Principal for support such as an elderly parent.

 

Benefits of a Revocable Living Trust Based Estate Plan for Management of Property During Incapacity

 So now let’s talk about the benefits to using a Revocable Living Trust centered Estate Plan to plan for incapacity. 

A Revocable Living Trust can dictate how incapacity is determined, and thus when your successor trustee is to step in to manage your property.  Further, the Trustee is to manage your property as instructed by you in your Trust document.  Therefore, clear guidelines can be used to guide and instruct the Trustee in his or her management.  Because of this, you can instruct your Trustee how to provide for you, and how to provide for others who rely on you for support such as an elderly parent, or a child, or other person.  This can be done with a Will as discussed above.

 

Under this type of estate planning, a Power of Attorney ancillary document would still be used even though the Living Trust gives the successor Trustee the power to deal with property that is in the Trust.  The Power of Attorney is used here to give the successor Trustee the power to do things like open mail, file tax returns, and to deal with property that is not inside the Living Trust and even put new property in the Revocable Living Trust.

 

The other advantages to Trust based estate plans are:

 

A long-term incapacity is less likely to end up as a guardianship

More privacy is provided because a Living Trust is a private document, and a Will becomes public when the court becomes involved.

A third party can look to the Trust document, if necessary, to see how disability is to be established as well as whom is to be the Trustee in control.

 

See lots of estate planning information on my website at: www.myestate-plan.com

 

Call me today and let’s start planning!  Thanks for reading.

 

William “Dan” Powell

619-980-2297

 

 

****Reminder****

Just like my website, nothing in this blog is intended as legal advice. If you need legal advice, contact an attorney licensed to practice in your jurisdiction. I am licensed to practice law in California.  Further, please remember that I speak in generalities in my blog (and on my website). There are so many different factors that can contribute and completely change the outcome that it would not be practical to discuss all of them here. This is why I speak in generalities. Thanks again for reading.

****************

This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information.

 

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