One question I am often asked is the difference between a Last Will & Testament and a Revocable Living Trust. While many simply default to a Last Will as their primary estate planning document, the Revocable Living Trust has been gaining significantly in popularity over the past several years. Here are the basics on both:
Last Will & Testament
A Last Will & Testament is a legal document that allows you to specify how (and to whom) your assets are to be distributed when you pass away. The document also outlines the person(s) who will be responsible to carry out your wishes.
It is important to remember that the Last Will & Testament only controls the assets that are in the name of the decedent alone on the date of his or her death - not assets jointly held by the decedent with another, such as a spouse, or which have named beneficiaries. In New York State, a Last Will & Testament must be admitted into probate by the Surrogate's Court in the county where the decedent resided. In probate, the Last Will must be proved to be valid, property must be inventoried and appraised, and any debts and taxes must be paid before the decedent's assets are distributed.
Revocable Living Trust
Created during an individual's lifetime, a Revocable Living Trust is a written agreement that determines how property titled in the name of the trust is to be managed and distributed while he or she is alive and upon death. The trust's grantor (or creator) retains the power to freely amend and revoke the trust as well as to reacquire its assets. This means he or she can change the terms of the trust at any time or, if desired, cancel it completely.
In New York, the same person can be both the grantor and sole trustee so long as one or more other person holds a beneficial interest (can be vested or contingent - for the present or future). A lifetime trust will be deemed to be irrevocable, which generally means it cannot be amended or revoked by the grantor, unless it expressly provides that is revocable.
The Revocable Living Trust only controls assets titled in the name of the trust. Upon the death of the grantor, it becomes irrevocable and, unlike a Last Will, does not need to go to probate. The trust's assets will be available for immediate distribution after the death of the grantor, subject to insuring sufficient assets are available to pay estate taxes and debts. This can result in a significant saving's to the decedent's estate.