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Living Will Vs Living Trust

In this article, we are going to review in detail the difference between a living will vs a living trust. We will check the role that both play and we will answer many of the frequently asked questions related to the topic.

If you need additional advice, our New York estate planning attorney can help you with your financial and estate planning matters. Call us today and let us know about your case in detail so we can put more than 30 years of service at your fingertips.

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The Difference In 2023 Between A Living Trust Vs A Living Will In New York

Estate planning is a key issue for existing homeowners and new home buyers in New York. Unfortunately it is a topic that is too often overlooked.

By using a living trust or a pour-over will in conjunction with a living trust you can completely eliminate or at least minimize the monetary and time expenses associated with probate as would be required when using a will exclusively as an estate planning tool.

Although a will is the easiest way to plan the distribution of assets in the event of death, a trust can also perform the same function in addition to offering some extra benefits such as avoiding probate and also:

  • Provides greater privacy and additional protection from court challenges compared to a will.
  • If you reside out of state it is especially helpful to avoid the need for Ancillary Probate proceedings in the states where you own the property.

Both wills and trusts are estate planning tools that will help ensure your assets are protected and bequeathed to your chosen heirs. This will be the case for your spouse too which is usually never an issue since Gift Tax Law and marital deduction provision within the United States allows the passing of wealth to a surviving spouse without incurring gift or estate tax liabilities. You can read more about this topic in our blog spousal right of election.

Before we go into detail about the differences between a living will vs a living trust, let’s start with a definition of the basic terms.

What Is A Living Will?

The will is a signed statement that coordinates the distribution of assets after death and also appoints an executor to oversee the liquidation of the estate.

The will also has the following considerations:

  • You can appoint a guardian to take care of the minors.
  • You can identify a trustee to manage any property left to minors.
  • In New York it must be signed in front of 2 witnesses who must sign the will.
  • As part of a comprehensive estate planning strategy in New York Is customary to prepare a living will as well as a Health Care Proxy.

To address any assets which aren’t in the trust at the time of death a “pour-over will ” is used in conjunction with a living will. The pour-over will stipulate that any assets which were not transferred into the trust prior to the death become part of the living trust and are to be disposed of as following the instructions by the living trust.

Note: You may find additional information regarding everything related to wills on our New York wills dedicated page.

What Happens If I Die Without A Will?

Dying without a will (intestate) causes the state to get involved and oversee the distribution of your assets. If you have minor children the court will appoint a guardian. To learn more about this please read our New York intestacy law section where we covered the topic in detail.

What Is A Living Trust?

Also known as a revocable trust, is a method for allocating assets to beneficiaries after death and avoiding or minimizing the probate process.

It is called a living trust because it is created while the trustor, or property owner is alive. It is revocable, as it may be changed during the life of the trustor. The trustor will maintain ownership of the property held by the trust while the trustor is alive.

The documentation names a trustee as well as a Successor trustee when assets such as real estate and bank accounts are transferred into a living trust by the grantor.

The grantor usually serves as the trustee meaning that he gains full control of the trust and assets contained therein during their lifetime. Therefore, a living trust may be revoked or amended at any time while the grantor is still alive.

Any tax or income obligations that come from the assets transferred into the trust remain a responsibility of the grantor.

The living trust defines what happens to the property once the settlor or grantor passes away. Since the assets have been transferred into the trust, those are not considered to be part of a decedent’s estate, consequently, those are not subject to probate.

As outlined in the trust documentation while winding down the estate, when the grantor passes away, the Successor trustee is the one that will be managing the assets, making distributions, and paying bills

Some key differences from a living trust compared to a will:

  • An irrevocable trust can’t be modified without the permission of the beneficiaries.
  • It offers additional protection from court challenges compared to a will.
  • The living trust is a private document that never becomes public while the will is submitted publicly to probate and becomes a public record.

Note: Check our page New York trust lawyers for detailed information on wills and services where we can help you

What Is Probate?

In New York, probate is a legal process where a Surrogate’s Court recognizes a deceased person’s will and authorizes the named executor to unwind and manage the estate through New York letters testamentary.

Probate is time-consuming and costly as there are attorney fees, court filing fees, and other expenses such as the costs associated with tracking down beneficiaries and court challenges.

As mentioned previously, a will submitted for probate becomes a public record. The Executor is tasked with paying, out of the estate of the deceased, obligations of the deceased, managing any pending payments and litigations, distributing assets, paying taxes and other responsibilities.

The reality is that you could easily lose an additional 2 to 4% of your estate due to attorney fees and court costs. Contact our New York probate lawyer for further information on your specific case.

Advantages Of A Living Trust Compared To A Will In New York

  • A living trust avoids the costly and time-consuming probate process.
    • Probate can’t be avoided if there are non-transferred assets prior to the death but the cost and time can be minimized by combining a living trust and a pour-over will.
  • Provides additional protection from court challenges and added privacy in comparison to a will.
  • Upon signing, a living trust is valid immediately so it will provide benefits in the event of disability or incapacity which can’t be accomplished by a will.

Note: You may be able to give some powers under the power of attorney but those will be limited to a delegation of power with little direction to the agent in many cases.

  • Generally, money and assets are distributed faster.
  • The trust is usually a more orderly process since, at the time of death, the asset and liability information is known by the trustee.
  • Trusts offer more flexibility. As long as the grantor’s intentions can be expressed in words they can be written and included in a trust.
  • A trust is more difficult to contest than a codicil or a will.
  • If the parties agree it is easier to modify the terms of a trust than a will even when the grantor becomes incompetent or dies.
  • While losing the original will document can become a big issue with trusts this is less important since there are copies that can substitute the lost original.
  • A trustee of a trust has more control and independence than the executor of a will because the trustee is not required to file a will or other reports with a court.

Note: Check our related blog “Difference between executor and trustee” to learn the differentiating aspects of both legal roles. You might also be interested in checking the differences between an executor and an administrator and learning more about the executor of an estate in New York.

Disadvantages Of A Living Trust In Comparison To A Will In New York

The main drawback is the additional cost, effort, and time that it takes to create a trust and transfer assets such as real estate into the trust.

Deed transfers may be a cost in the short term and the administrative process can be tedious even when most institutions don’t charge to transfer liquid assets. Let’s take a look at some of the drawbacks of a living trust vs a living will:

  • During an individual’s lifetime, the lifetime costs of maintaining and administering a revocable trust are more than a will.
  • Up-front costs to fund and create the trust are higher than those for a will.
  • Some assets may not be held in a trust without suffering adverse income tax effects such as retirement accounts.
  • While claims of creditors of an estate are cut off 150 days after the appointment of the executor this is longer for a trust.
  • Grantors must spend time and money to check that all property was correctly transferred to the trust. If those were not correctly transferred to the trust, probate may still be necessary as the trust may provide little or no savings at all.
  • In cases where there are any assets that didn’t get to the trust, a will is still needed even if you have a trust.
  • In general, trusts can’t be used to avoid creditors.
  • Assets transferred to the revocable living trust are not protected for purposes of Medicaid eligibility and long term care planning. Since the trust is revocable, the assets are taken as available resources for Medicaid eligibility purposes.
  • There are no estate tax savings or gift tax consequences from making transfer of assets to the trust or revoking it.

Key Differences Between Wills And Trusts In NY And NYC

  • Name guardians for children
    • Trusts: No
    • Wills: Yes
  • Can you leave property to young children?
    • Trusts: Yes
    • Wills: Maybe. (Please check note below)
  • Name beneficiaries for property:
    • Trusts: Yes
    • Wills: Yes
  • Name an executor:
    • Trusts:No
    • Wills: Yes
  • Requires a notary public:
    • Trusts: Yes
    • Wills: No
  • Probate court:
    • Trusts: No
    • Wills:Yes
  • Can it be challenged in court?
    • Trusts: Not usually
    • Wills: Yes
  • Rules about inheritance?
    • Trusts: Yes
    • Wills: No
  • Avoid a conservatorship
    • Trusts: Yes
    • Wills: No
  • Requires witnesses?
    • Trusts: No
    • Wills: Yes
  • Is it simple to make?
    • Trusts: No
    • Wills: Yes
  • Can it be revised?
    • Trusts: Yes in the case of being a revocable trust.
    • Wills: No.
  • Can you leave instructions on how debts and taxes should be paid?
    • Trusts: No
    • Wills: Yes
  • Type of record:
    • Trusts: Private
    • Wills: Public

Note: Children under 18 cannot legally own property (except for items of little value). The property left to a minor must be managed by an adult until the child turns 18. When using a living trust to leave property to a minor the trustee will manage the property until the child reaches an age that you determine.

In the event of leaving property to a minor using a will, you should name an adult to manage the property. Otherwise you can name a custodian under the Uniform Transfer to Minors Act or use your will to set up a testamentary trust for young children.

If you have not named an adult to manage property left to a minor via a will, the court will name someone else to do it after your death.

Frequently Asked Questions On A Living Will Vs A Living Trust

Here we are giving answers to some of the most popular questions regarding a living will vs a living trust. If you need help with your case and specific situation do not hesitate to contact us. From our offices in Astoria, Brooklyn, and Manhattan we have been serving the New York community in their five boroughs for over 30 years.

How Much Does A Living Trust Typically Cost In NY And NYC?

The cost of setting up a living trust in New York may vary between $3,000 and $6,000 considering individuals typically prepare it as one element of an overall estate planning process.

The full process may include health care directives, power of attorney, asset integration guidance or a pour-over will amongst other additional documentation.

What Is My Best Option, A Will Or A Trust?

While the trust will streamline the process of transferring an estate once you pass away and avoid the costly period of probate if you have minor children, a will that names a guardian will be critical to protecting both the inheritance and the minors.

In some cases, it is really a personal choice where some experts recommend having both. Also, consider the fact that a will is usually less expensive and easier to set up than a trust which is a way more complex legal document.

To give you a clear answer you should contact our New York inheritance lawyer. With over 30 years of experience solving estate planning matters in New York, our lawyer Norma E. Ortiz will study your case.

So, Do I Really Need A Will, A Trust, Or Both?

When considering a living will vs a trust, the reality is that everyone should have a will but not everyone likely needs a revocable or living trust. With minor children, property, and assets to place in a trust, having both might make sense.

Whether you need a living trust also depends on how wealthy you are, your age, and whether you are married amongst other considerations.

Even if your decision is that you need a living trust you should also make a will to name guardians for minor children, name an executor and take care of any property that won’t appear in your trust.

Does The Use Of A Will Override A Living Trust?

No, one doesn’t usually trump another since these are two separate legal documents. However, in case an issue arises, a living trust will usually override a will since a trust is a document with its own entity.

What Happens If I Don’t Make A Will Or A Living Trust?

In this case, your property will be distributed following the laws of your state.

Things That Trusts And Wills Can’t Achieve

  • Tax estate reduction: Neither living trust or wills can help you reduce estate tax but most estates will not owe estate tax.
  • Leave final wishes: It is permissible to leave some final wishes and funeral instructions in your will but never in a living trust. Moreover, it’s better to leave them in a separate document.
  • Leave password for online accounts: Although the executor will appreciate being able to access online accounts, laptops, and other devices- do not leave this information in your living trust or will. Instead, keep it in a separate document together with your other estate planning documentation.
  • Leaving money to pets: You can not leave money to pets since pets can’t own property. Instead, you can create a pet trust or use your will to leave your pets to a trusted caretaker. Leaving property to your pet will end with that property in your residuary estate.

If I’m Not Wealthy I Don’t Need A Revocable Living Trust

While it is true that the more you are worth the more compelling the trust becomes, this statement is not true in general.

If You Transfer Property Into A Revocable Living Trust It Is Not Yours Anymore

This is not true since from a practical point of view you retain the power to take the assets back and revoke it.

For Out-Of-State Property Ownership Is A Living Trust Beneficial?

Yes. In case a deceased individual lived out-of-state but owned property under their personal name in New York, an Ancillary Probate proceeding in the Surrogate’s Court in New York is required to be able to sell the property.

When you have all property in a living trust you avoid the need for probate in the decedent’s state of residence as well as Ancillary Probate proceedings in other states where they owned property.

Does The Power Of Attorney Grant Me The Same Control As A Trust?

Generally, that is not the case since the power of attorney can be revoked at any time.

Ortiz & Ortiz Can Help You Decide Between Living Will And A Living Trust

What you must have realized after reading our blog about a living will vs living trust is that it is important to settle your affairs earlier rather than later in life. A trust, a will, or both can ensure your possessions and assets end where you want them to go.

If you are unclear on the path to follow do not hesitate to contact our New York law firm. We provide extensive and personalized support for individuals facing these and other financial matters in New York. Remember that making an estate plan a priority today can save money and a lifetime later and help yourself and your loved ones.

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