Living Trusts vs. Wills: Which One Is Right for You?

When it comes to estate planning in Ontario, you have two main options: a living trust or a will. Both have their own unique benefits and drawbacks, and the right choice for you will depend on your specific circumstances. In this article, we'll explore the key differences between living trusts and wills, and help you determine which one is the best fit for your needs.

• What is a Living Trust?
• Advantages of a Living Trust
• Disadvantages of a Living Trust
• What is a Will?
• Advantages of a Will
• Disadvantages of a Will
• Which One is Right for You?
• FAQs

What is a Living Trust?

A living trust, also known as an inter vivos trust, is a legal document that allows you to transfer ownership of your assets to a trust during your lifetime. The trust is managed by a trustee, who is responsible for administering the trust according to your wishes. This means that when you pass away, your assets are not subject to the probate process, which can be time-consuming and costly.

Advantages of a Living Trust

One of the primary benefits of a living trust is that it allows for greater privacy and control over your assets. Because your assets are held in the trust, they are not subject to public record during the probate process. This can be particularly important for individuals with significant wealth or those who want to keep their financial affairs private. Additionally, a living trust can provide more flexibility in how your assets are distributed, as you can specify the terms and conditions of the trust. This can be especially useful for blended families or individuals with minor children or disabilities.

Another key advantage of a living trust is that it can help avoid the delays and costs associated with the probate process. Probate can be a lengthy and expensive process, and a living trust can help your beneficiaries receive their inheritance more quickly and with fewer hassles.

Disadvantages of a Living Trust

While a living trust offers many benefits, there are also some potential drawbacks to consider. One of the main disadvantages is the upfront cost of establishing the trust. The legal fees and administrative costs can be significantly higher than the cost of creating a will. Additionally, you'll need to actively transfer ownership of your assets to the trust, which can be time-consuming and require ongoing maintenance.

Another potential downside of a living trust is that it may not provide the same level of flexibility as a will. While you can specify the terms of the trust, you may have less control over how your assets are distributed after your death. Finally, a living trust may not be the best option for everyone, as it requires a certain level of complexity and ongoing management that may not be suitable for all individuals.

What is a Will?

A will, on the other hand, is a legal document that outlines how you want your assets to be distributed after your death. Unlike a living trust, a will does not transfer ownership of your assets during your lifetime. Instead, your assets will go through the probate process, which is the court-supervised process of distributing your assets according to the terms of your will.

Advantages of a Will

One of the main advantages of a will is that it is generally less expensive to create than a living trust. Wills are also more straightforward and easier to understand, making them a more accessible option for many individuals. Additionally, a will can provide more flexibility in how your assets are distributed, as you can specify the terms and conditions of your bequests.

Another benefit of a will is that it allows you to name a guardian for any minor children you have, which can be especially important for blended families or those with complex family dynamics.

Disadvantages of a Will

The primary downside of a will is that it is subject to the probate process, which can be time-consuming and costly. Probate can also be a public process, meaning that the details of your estate may become a matter of public record. This can be a concern for individuals who value their privacy or have complex family situations.

Additionally, a will may not provide the same level of control and flexibility as a living trust, as it does not allow you to specify the terms and conditions of how your assets are distributed in the same way.

Which One is Right for You?

Ultimately, the choice between a living trust and a will will depend on your specific needs and circumstances. If privacy, flexibility, and avoiding probate are your top priorities, a living trust may be the better option. However, if you're looking for a more straightforward and cost-effective solution, a will may be the way to go.

Well, here's the thing: the best approach is often a combination of both a living trust and a will. This can provide the benefits of both and ensure that your estate planning needs are fully covered. As with any important legal decision, it's always a good idea to consult with an experienced estate planning lawyer who can help you navigate the process and ensure that your wishes are properly executed.

FAQs

How much does it cost to create a living trust in Ontario?

The cost of creating a living trust in Ontario can vary depending on the complexity of your estate and the legal fees charged by your attorney. On average, you can expect to pay between $2,000 and $5,000 to establish a living trust.

Can I change my living trust after it's been created?

Yes, you can typically make changes to your living trust, such as adding or removing assets, changing beneficiaries, or even revoking the trust entirely. However, it's important to work with your estate planning lawyer to ensure that any changes are made properly and in accordance with the law.

What happens if I don't have a will or a living trust?

If you pass away without a will or a living trust, your assets will be distributed according to the Ontario Succession Law Reform Act. This means that your assets will be divided among your closest living relatives, which may not align with your wishes. To ensure that your estate is handled according to your preferences, it's essential to have a comprehensive estate plan in place.

Can a living trust help me avoid probate in Ontario?

Yes, one of the primary benefits of a living trust is that it can help you avoid the probate process in Ontario. Because your assets are held in the trust, they are not subject to the court-supervised distribution of a will, which can be a lengthy and costly process.

What happens if I become incapacitated and have a living trust?

If you become incapacitated and have a living trust, the trustee you've named will be responsible for managing your assets and making decisions on your behalf, according to the terms of the trust. This can provide greater control and protection than a traditional power of attorney, as the trustee's actions are dictated by the trust document rather than the potentially changing desires of the incapacitated individual.