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What is the difference between a Living Trust and a Will?

A Living Trust and a Will are both important legal instruments in estate planning, each serving distinct purposes. However, understanding their differences, and why an Asset Protection Trust might offer even greater advantages, is crucial. Here’s a clear breakdown:

1. Creation and validity:

  • Living Trust: A living trust is created during the grantor’s (the person creating the trust) lifetime and takes effect immediately. It is a legal document that allows a grantor to place assets into a trust, with a designated trustee managing those assets for the benefit of one or more beneficiaries.
  • Will: A will is a legal document that outlines how an individual’s property and assets will be distributed upon their death. It only becomes effective after the testator’s (the person creating the will) death.

2. Probate:

  • Living Trust: Assets placed in a living trust avoid probate, which is the legal process of validating a will and distributing the deceased’s assets. This can save time and reduce costs associated with the probate process.
  • Will: A will must go through probate, which can be time-consuming and expensive. The probate process also makes the details of the will a matter of public record.

3. Privacy:

  • Living Trust: Living trusts offer greater privacy because they do not become public records. The terms of the trust and the distribution of assets remain confidential.
  • Will: Wills become public records during the probate process, and as a result, the distribution of assets and other terms of the will can be accessed by anyone.

4. Management during incapacity:

  • Living Trust: A living trust can provide for the management of the grantor’s assets during their lifetime, even if they become incapacitated. The trustee can continue to manage the trust assets for the benefit of the grantor and beneficiaries without the need for court intervention.
  • Will: A will does not provide any provisions for managing the testator’s assets during their lifetime or in the event of their incapacity. In such cases, a court-appointed guardian may need to be assigned to manage the incapacitated individual’s affairs.

5. Flexibility and modification:

  • Living Trust: A revocable living trust can be amended or revoked by the grantor during their lifetime, allowing for flexibility in managing and distributing assets. Irrevocable trusts, however, cannot be changed or revoked without the consent of the beneficiaries and/or a court order.
  • Will: A will can be changed or revoked by the testator during their lifetime, as long as they are mentally competent.

One key aspect of a Living Trust, is that it can act as a Will for assets that cannot be titled in the Trust’s name. One of the primary advantages of a Living Trust is its ability to hold and manage a wide range of assets, including real estate, investments, bank accounts, and personal property. However, there may be certain assets that cannot be titled in the Trust’s name, such as retirement accounts, life insurance policies, and certain government benefits.

The Asset Protection Trust Advantage

While both Wills and Living Trusts are foundational estate planning tools, an Asset Protection Trust offers additional strategic advantages:

  • Enhanced Protection: Unlike standard Living Trusts, Asset Protection Trusts safeguard your assets from potential creditors, lawsuits, and financial threats.

  • Flexible Distribution: Assets remain accessible to the grantor through structured withdrawals, subject to approval from secondary beneficiaries.

  • Privacy and Probate Avoidance: Maintains confidentiality and avoids probate, similarly to a Living Trust.

  • Dynamic Beneficiary Management: Allows adjustments to secondary beneficiaries after creation, providing ongoing adaptability to changing circumstances.

An Asset Protection Trust stands out as a powerful tool for those seeking to ensure their assets are securely managed, protected, and flexibly accessible.

Due to all the reasons above, we recommend creating Digital Living Trust or an Asset Protection Trust.

Call us today to learn if an Asset Protection Trust can help you: (650) 665-6401

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What is a Trust?

A Living Trust is a financial tool that lets you plan, organize, and protect your life. It’s a personal entity that allows you to add assets and plan out your inheritance. Eliminating legal battles, cost, and time spent by your loved ones. 

Think of it like a personal LLC that you put everything you own in. Except it doesn’t protect you from liability like an LLC does, it protects you from probate and conservatorship. 

Probate is the complicated court process (12-18 months) where a judge decides what happens to your assets after you die, become incapacitated, or are “deemed” incapable. Creating a living trust allows your assets to completely circumvent probate and immediately transfer to your loved ones. 

In addition to being able to name heirs (your beneficiaries), a Trust also allows you to assign someone to manage it (your successor trustee). Instead of going through probate, your Successor Trustee takes control of the Trust, handles your affairs, and distributes your assets according to your instructions. The person you select as Successor Trustee should be your most trusted person. Like a best friend or closest family member.

At Dynasty, we believe everyone should have a Living Trust. If you have children, assets, or plan to acquire assets in the future, you should create a Trust. That way when you buy your next home, open a bank or brokerage account, get startup shares, etc. – you can immediately title them in your trust.