A will or living trust? Learn what's right for you

Published on October 1, 2009

Regardless if your estate is large or small, planning is essential to ensure everything goes the way you wish after you die.

The two most familiar options are a will and a trust. But how do you know what's right for you?

"It's going to depend on your situation," says Kathleen Belmonte, president of the National Association of Estate Planners & Councils. "Think about your beneficiaries: Do you need to protect your money from a child with a substance abuse problem? Do you need to arrange care for a special needs child? Do you have any charitable intent? An estate planner will help you with the best course of action based on your needs."

Taxes are imposed upon estates that have a net value of $3.5 million or more. In 2010, the estate tax will disappear completely. Then, unless Congress passes an extension, the tax exemption will revert back to $1 million in 2011.

Determining what's best for you can vary depending on where you live and what assets you have to bequeath. A will is a legal document listing individual names or charitable organizations that will receive your assets after your death. A will goes through the probate court process.

"It depends very much on the state law and the county office if that's a horrendous process or an easy one," says estate attorney Laura Farthing of Rockville, Md. "For Maryland, probate is a very good option. Executors can handle assets right away." Because a court auditor oversees the execution, there is a level of certainty that everyone will be treated equally. However, the court fees and the length of time it takes to process could be a deterrent.

A living trust allows you to administer your assets during your lifetime and then transfer them to your beneficiaries when you die without court involvement. Although it costs more to set up than a will, there will be less hassle for your heirs.

"When you die, they can begin the transfer process without the court system," says estate attorney Richard Venditti of Tarpon Springs, Fla. "It doesn't allow any downtime, any court orders and you avoid the expense." Venditti recommends anyone with assets valued at $75,000 or more to consider a trust, which he says could be set up for around $1,500 versus $450 for a will.