You may assume that the will/trust question is an either or situation. There is some truth to this, because you have to use one of them as your primary asset transfer vehicle.
That being said, there are a couple of reasons why you still need a will if you have a living trust. Before we explain them, we will look at some of the benefits that living trusts provide.
Consolidation of Assets and Incapacity Planning
When you have a living trust, you make the trust the owner of the property that will comprise your estate. This streamlines the estate administration process for the trustee, and the beneficiaries reap the rewards.
Another major benefit of living trusts is the ability to prepare for incapacity. This can be overlooked because no one expects to be in this position, but the statistics tell a different tale.
About 10 percent of all senior citizens have Alzheimer’s disease, and the number grows to 32 percent for folks that are 85 years of age and older. This is not the only cause of cognitive impairment so this is a looming threat that everyone should take seriously.
Impairment is not always obvious. Some people are competent on the surface, but they may be more easily manipulated by individuals who want to take advantage of them.
Elder financial abuse is a very big problem in the United States today. Studies have estimated annual losses as high as $36.5 billion, and in many cases, the perpetrators are family members, “friends,” or caregivers.
When you have a living trust, you can name a disability trustee to manage the trust in the event of your incapacity. This can be someone that you know and trust implicitly, and you can alternately use a professional fiduciary like a trust company or the trust department of a bank.
You Control the Nature of the Distributions
If you do not feel comfortable providing lump-sum inheritances that can be easily squandered, you can use a living trust with a spendthrift clause. It would become irrevocable after your death, and the trustee would have exclusive control of the assets.
The beneficiary’s creditors would not have access to the principal, and you could dictate the distribution terms.
For example, you could instruct the trustee to distribute the annual earnings broken up into monthly increments. Portions of the principal could be added to reach a certain dollar amount. This is a random example, but the details would be up to you.
Pour-Over Will
Now that we have explained some of the benefits, we can get to the point. When you have a living trust, you may not convey all of your property into the trust for one reason or another.
To account for this, your estate plan should include a pour-over will. This would facilitate the transfer of these assets into the trust after you are gone.
Guardian for Dependents
Estate planning is important for adults of all ages, and it becomes a must when you have children. You should certainly designate a guardian to care for the children if it ever becomes necessary.
This cannot be done in a revocable living trust. You can record your guardian choice in a will so you should take this step if you are a parent or the guardian of a dependent adult.
Access Our Estate Planning Worksheet
We have a treasure trove of written material on this site that you can access, and our estate planning worksheet is one of our most useful tools. You can gain a more complete understanding of the process if you take the time to go through it, and it is being offered free of charge.
To get your copy, visit our worksheet page and follow the simple instructions.
Need Help Now?
If you have learned enough to know that it is time for you to work with an attorney to put an estate plan in place, we are here to help.
You can schedule a consultation with our attorney in Charlotte, North Carolina or Huntersville, North Carolina if you call us at 704-944-3245. The number in Ashland, Kentucky is 606-324-5516, and the number in Florence, Kentucky is 859-372-6655. If you would rather send us a message, fill out our contact form and we will get back in touch with you promptly.
John’s practice focuses on the use of Wills and Living Trusts in Estate Planning to help individuals protect their families and preserve their legacies after their deaths, but his practice also focuses on the critical issues of protecting individuals with dementia or other diminished capacity, assisting individuals in qualifying for Medicaid and other government benefits to offset the costs of long-term care, and providing special needs planning.
John is admitted to practice law in North Carolina, South Carolina, Kentucky, and Ohio, and he is accredited by the Department of Veterans Affairs.
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