Wills and living trusts are common estate planning tools used to transfer assets after death, but they have some key differences. This article will compare wills and living trusts in Alabama, looking at how they work, when they take effect, whether probate is avoided, their costs, tax benefits, and more. If you live in Alabama and are considering your estate planning options like wills or revocable living trusts, read on to learn which one better fits your situation.
Wills in Alabama – How Do They Work?
A legal document known as a last will and testament, or just a will, allows you to designate how your assets and property will be divided after your passing.
With a will in Alabama, you can:
- Name beneficiaries to inherit your property
- Assign an executor to carry out your wishes
- Provide instructions for distributing specific assets to each beneficiary
- Name guardians for any minor children
- Make arrangements for pets
- Give gifts to charities
Wills are relatively easy and inexpensive to create. You can make a will on your own by following your state’s requirements for will creation. Or you can use an online will maker or Daphne estate planning attorney to customize your will.
However, there are some downsides to only having a will:
- Wills must go through probate – The probate process can take months or even years, delaying access to inheritances for your beneficiaries.
- Wills eventually become public record – Once probated, anyone can access your will since it enters the public court records.
- Wills don’t avoid estate taxes – Your estate may still be subject to federal or state estate taxes. An estate tax is a tax on transferring property after someone dies.
- Wills don’t protect assets from creditors – If you have unpaid debts, creditors can make claims on your estate.
Overall, wills are a great option for basic estate planning needs. But for larger, more complex estates, trusts offer additional benefits.
How Do Living Trusts Work in Alabama?
A more intricate legal structure called a living trust enables you to give the trust ownership of your assets while you are still alive. A trustee that you appoint oversees the trust’s assets on behalf of the beneficiaries.
Living trusts can be revocable or irrevocable. A revocable living trust lets you maintain control of the assets and make changes or dissolve the trust at any time. An irrevocable trust cannot be changed once created.
Here are some key advantages of using a living trust in Alabama:
- A properly funded living trust avoids probate after your death, allowing faster distribution of assets to beneficiaries compared to a will.
- Trusts are not public records, so they allow you to transfer assets privately outside of probate court.
- Assets in a living trust are more protected from creditors and lawsuits after your death compared to assets passing through a will.
- Living trusts can be useful tools for estate tax planning in larger estates. Transfers to irrevocable trusts may reduce potential estate taxes.
- A living trust can be used to provide continued management of your assets if you become incapacitated before death.
The main drawbacks of living trusts are the higher upfront costs and complexity to setup compared to wills. You also need to make sure to properly fund and transfer assets into the trust for it to work as intended.
So in summary, living trusts in Alabama can provide more control, privacy, and protections than a basic will but require more planning and funding.
Key Differences Between Wills and Living Trusts
Deciding whether a will or living trust best fits your estate planning goals depends on several factors. Here are some of the key differences between wills and trusts:
Will Living Trust
When It Takes Effect Only after death Upon creation and funding
Probate Assets passing through will must go through probate Avoids probate if funded
Public Record Will and list of beneficiaries become public record once probate starts Trust terms and distributions remain private
Asset Protection Limited protections – assets can still be subject to creditors and estate taxes Provides more protections from creditors and flexibility for estate tax planning
Cost Less expensive to create than a living trust More expensive to setup and fund
Contests More prone to contests in probate court Provides more privacy and protections if contested
Is a Living Trust Better Than a Will?
There is no definitive answer to whether a living trust or will is always “better”- it depends on your unique situation and goals. However, there are some instances where a living trust may be preferable:
- You want to avoid the public process of probate
- You own substantial real estate or financial assets
- You want to reduce estate taxes through an irrevocable trust
- You have concerns about asset protection from creditors
- You want to plan for potential incapacity with a trustee managing assets
For many, a combination of both a will and a revocable living trust can provide comprehensive estate planning. Your will covers any assets not transferred to your trust, while the trust becomes your main estate planning vehicle that can help avoid probate for improved privacy and efficiency.
Making Wills and Trusts in Alabama
If you live in Alabama, here are some tips as you get started with your estate plan:
- Learn your state’s requirements – Alabama has specific laws regarding the creation and validity of wills and trusts. Make sure your documents follow all requirements.
- Understand probate in Alabama – The state has streamlined procedures for simpler probate processes compared to some states. Still, probate can take 6-12+ months.
- Consult an attorney – While not legally required, meeting with a trust lawyer can help ensure your plan is properly customized and executed.
- Consider an online option – For more basic planning, reputable online resources let you easily make a legally valid will or trust customized for Alabama.
- Name fiduciaries – Select a trusted executor for your will and trustee for your trust who can ensure your wishes are properly carried out.
- Review regularly – Revisit your estate plan every few years and after major life events to make any needed updates.
How to Create a Living Trust or Will in Alabama
If reviewing the differences between wills vs living trusts leads you to want to create one of these estate planning documents customized for your situation, here is how to do so in Alabama:
- Consult with an estate planning lawyer – While do-it-yourself will or trust templates seem appealing, given the amount at stake, working with a professional to ensure it’s legally binding is crucial. Expect to pay $300-$800 for Alabama wills or $1,500-$3,000 for revocable living trusts.
- Collect asset details – Your attorney will have you inventory major holdings like property, investment accounts, life insurance policies, vehicles, and any outstanding debts so the will or trust incorporates everything needing coverage.
- Name beneficiaries – You’ll decide who inherits if a will and any backups like children or charity. With trusts, beneficiaries are named but you maintain control as the trustee during life over assets like houses put into the trust.
- Discuss special situations – Make sure to cover all unique considerations like providing for minor children, second spouses, siblings in need of extra support, disabled relatives requiring care coordination, or property spanning multiple states.
- Review documents thoroughly and fund trust if applicable – Before signing your Alabama will or living trust, it’s critical to validate all details like guardian assignments, distribution instructions or wishes, trustee appointments, and estate executor nomination. If establishing a living trust, now is the time to begin titling assets like real estate and financial accounts in the name of the trust entity.
Trusts and Wills Help Secure Your Legacy
At The Law Offices of Brenton C. McWilliams in Daphne, our attorneys have the experience and knowledge to advise and assist you with your will, living trust, and other estate planning needs. We serve clients throughout Baldwin County and can help you protect your legacy.
