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  • Writer's picturePhilip M. Parry

Understanding the Difference Between a Will and a Revocable Living Trust

As an Estate Planning Attorney in Massachusetts, I often get questions from clients about the differences between a Last Will and Testament (commonly referred to as a will) and a Revocable Living Trust (RLT). Both are essential tools in estate planning, but they serve different purposes and offer distinct benefits.


What is a Last Will and Testament?

A Last Will and Testament is a legal document that outlines how a person wants their assets distributed upon their death. A will allows the testator or testatrix to appoint a personal representative to manage their estate, designate guardians for minor children, and specify their final wishes. Although a will is a fundamental component of any estate plan, it does not avoid probate.


What is Probate?

Probate is the legal process through which a deceased person's will is validated, and their assets are distributed under court supervision. In Massachusetts, probate can be a lengthy and costly process. On average, probate in Massachusetts takes about 9 to 12 months to complete, but complex estates can take much longer. The costs associated with probate include court fees, attorney fees, and personal representative fees, which can significantly reduce the value of the estate. Furthermore, your personal representative may have to hire an attorney to assist them with the process and this will also add to the time, money, and energy issues that the probate process presents.

What is a Revocable Living Trust?

A Revocable Living Trust (RLT) is a type of trust that holds a person’s assets during their lifetime and distributes the assets after their death according to the terms of the trust. As the name implies, this type of trust is revocable, meaning the person who creates the trust can alter or dissolve the trust at any time during their lifetime. A RLT consists of three main parts: the Grantor, the Trustee, and the Beneficiaries.


1.     Grantor: The Grantor is the person who creates the trust. They transfer ownership of their assets into the trust and have the power to amend or revoke the trust during their lifetime.

2.     Trustee: The Trustee is the person or entity responsible for managing the trust's assets. Often, the Grantor serves as the initial Trustee, maintaining control over the assets. A successor Trustee is named to take over management after the Grantor's death or if they become incapacitated.

3.     Beneficiaries: The Beneficiaries are the individuals or entities entitled to receive the benefits from the trust's assets after the death of the Grantor. The Grantor specifies who the beneficiaries are and how the assets should be distributed to them.


Key Benefits of a Revocable Living Trust

  1. Avoiding Probate: One of the most significant advantages of an RLT is that it avoids probate. Assets held in a trust are not subject to probate, allowing for a quicker, more private distribution of assets. This can save your beneficiaries the time, expense, and public exposure associated with probate.

  2. Maintaining Privacy: Unlike a will, which becomes a public record during probate, a trust remains private. This means the details of your estate and your beneficiaries are not disclosed to the public.

  3. Continuity in Case of Incapacity: An RLT provides a mechanism for managing your assets if you become incapacitated. The successor trustee can step in to manage the trust assets without court intervention, ensuring seamless management of your financial affairs.

  4. Tax Planning: An RLT can be structured to help minimize estate taxes, which is especially important given the Massachusetts Estate Tax threshold and the Federal Estate Tax threshold.


Massachusetts and Federal Estate Tax Thresholds

Massachusetts has an estate tax threshold of $2 million. This means that if the total value of an estate exceeds $2 million, the estate will be subject to Massachusetts estate tax. The Federal Estate Tax threshold is significantly higher, at $13.61 million for individuals in 2024. Estates exceeding this threshold are also subject to the federal estate tax.

A Last Will and Testament alone cannot protect an estate from these taxes. However, a Revocable Living Trust, with the correct provisions, can help mitigate the impact of both Massachusetts and federal estate taxes.


The Role of a Pour-Over Will

A common misconception is that a will becomes obsolete in an estate plan with a Revocable Living Trust. However, this is not the case. A pour-over will works in conjunction with an RLT. It is typically a very short will, and its primary function is to "pour over" any assets that were not transferred into the trust during a person’s lifetime into the trust upon their death.


Benefits of a Pour-Over Will

  1. Comprehensive Asset Coverage: Ensures that any assets inadvertently left out of the trust are still subject to the trust’s terms, providing a safety net for the complete distribution of your estate.

  2. Simplicity: Streamlines the estate planning process by consolidating assets into one central trust, making it easier for the successor trustee to manage and distribute them according to your wishes.

  3. Peace of Mind: Provides reassurance that all your assets will be handled according to your trust's instructions, even if some were not transferred to the trust before your death.

 

Conclusion

Choosing between a Last Will and Testament and a Revocable Living Trust is an important decision in estate planning. While both tools have their place, a Revocable Living Trust offers significant advantages, particularly in avoiding probate, maintaining privacy, ensuring continuity of asset management, and providing opportunities for estate tax planning. However, a pour-over will remains an essential component, ensuring that all your assets are ultimately governed by the trust.


If you have questions or need assistance with your estate planning, feel free to contact my office. We're here to help you create a comprehensive plan that meets your needs and provides peace of mind for you and your loved ones.


Parry & Parry, P.C. and Parry Title Company, P.C. provide this blog for informational purposes only. This blog does not constitute legal advice. Readers should not act upon any information presented here without seeking professional legal counsel.

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