Should my Estate Planning include both a Will and Living Trust?

Understanding the difference between a will and a living trust can guide you in selecting the one that best meets your needs. A revocable living trust is a trust that is established during your lifetime. You would be the Trustor – the person who creates the trust and transfers assets into trust ownership. The trust would also have a Trustee responsible for managing assets owned by the trust. You can act as your own trustee or have a trusted family member or friend serve. Lastly, the trust has beneficiaries. You would likely be the lifetime beneficiary of your trust. This means you would receive income and principal from the trust as directed by the terms of the trust. There are also remainder beneficiaries. Remainder beneficiaries are the persons and/or charities who would receive the balance of the trust assets after you pass away. In this sense, a trust is a ‘will substitute’ because it does the job of a will in expressing your wishes about where you want your assets to go upon your death. One benefit of a living trust is avoiding probate on assets owned by the trust, including your home.

A will is created by the testator and controls the distribution of probate assets in the decedent’s estate. A probate asset is an asset in an individual’s name alone that does not have a right of survivorship or beneficiary designation. The will also appoints a personal representative (executor) to be in charge of the probate estate.

If you have a revocable living trust you will also have a special type of will, which is sometimes called a pourover will. The pourover will is used as a safeguard in case an asset that should have been owned by the trust but wasn’t needs to go through the court process known as probate. Once the probate is finalized the pourover will directs that the asset be transferred to your trust so the terms of the trust control the distribution of that asset.

Whether you have a will as your main estate planning document or a living trust, if you have a child or grandchild with special needs you should consider special needs planning as part of your estate planning. The safest place for a special needs trust (SNT) under federal law is a will, so the SNT would be in your pourover will if you have a trust. Assets going into a special needs trust at your death will not disqualify the beneficiary from means tested benefits like Supplemental Security Income (SSI) and Medicaid.

An experienced estate planning attorney can help you understand the different types of trusts and the benefits of wills and trusts and their uses. Contact the Estate Planning attorneys with the Law Offices of Nay & Friedenberg in Portland, Oregon at (503) 245-0894 to set an appointment.

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