Q: What is the benefits or disadvantages of will compared to a trust
My mom is 90 years old and she has a will. I keep on telling her I think she should get a trust, I think it’s called a living trust. She has six children and everything is to be divided equally. Is a will sufficient
A: Simply put, a will takes effect after death. There are two types of trusts. One is irrevocable which means it can never be changed without the consent of the beneficiaries. The other trust can be changed by the grantor during lifetime.
The honest answer is that a good Will is all the most people need. Why? A properly drafted living trust generally costs several times what a Will generally costs upfront and over your lifetime. Thus, the reason you will see most poor and middle class people use Wills and many of the Rich will have both a Will and Living Trust.
1) You can easily pay $5K or even 15K for a properly drafted living trust versus maybe $1500.00 for a Will.
2) Most people will leave their money to an exempt person under the NJ inheritance tax law such as:
Surviving domestic or civil partners
Children and subsequent direct descendants (grandchildren, great-grandchildren, etc.)
Parents and other direct ancestors (grandparents, great-grandparents, etc.)
Step-children (but not subsequent step-descendants)
3) Although a Will may have to go thru probate. Probate in NJ unlike other states is really simple and streamlined.
Changing all your assets into the trusts name and then changing to the beneficiaries name can cost a lot of time and money much more time and money than even probate. Probate for most people can be done in one visit to the probate office of the court. Sure you may have to wait for a tax clearance and probate letters (generally takes a few weeks) but it can be easier to do this then to prove and get documents to the bank that you are the proper grantor/grantee of the trusts assets.
4) You still may need a will anyway: A living trust can’t address everything, such as naming a guardian for minor children, a will is always needed to address any assets that didn’t get transferred into the living trust before death such as a new car or expensive jewelry and thus you may go to probate anyway. Thus, a will is still needed even in many situations where there is a living trust.
5) Generally with a living trust you will need to file a tax return for the trust each year causing upfront expenses.
Thus, a living trust for many people is simply a more expensive way to go to do the same thing your will can do albeit with a visit to the probate court. But you need your will or living trust to be properly drafted and it should be reviewed by your lawyer every 5 years to make sure it is up to date for the current law and a lawyer that reviews your situation should tell you which one you should choose.
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