Sometimes, people ask estate planning attorneys if they can use their living trust to replace a last will and testament. While these types of questions are understandable, they reflect a misunderstanding about what each of these essential estate planning tools do. Both a living trust and a last will and testament are key pieces of any estate plan. Each of them serve specific purposes, and each of them have benefits and drawbacks. Here’s what you should know about using a living trust to replace a will in North Carolina.
Revocable Living Trusts
In recent years, the estate tax exemption has increased to the point where most people do not have to worry about paying estate taxes. Because of this, much of the focus of estate planning has shifted away from estate tax mitigation, and has instead focused on probate avoidance. Revocable living trusts are excellent at allowing you to avoid probate.
When you create a living trust, you create a legal entity that can own property. The trust will survive your death, and the property it owns will be able to be transferred to new owners outside of the probate process. As long as you take the proper steps to ensure that you adequately fund your revocable living trust while you are alive, your trust will be one of the best probate avoidance tools in your arsenal.
Last Will and Testament
A last will and testament is one of the primary tools to use if you want to leave inheritances. You can make almost any inheritance decisions you want as long as you make sure your will complies with North Carolina laws.
A will also allows you other benefits. For example, through your will you can name a guardian. If you have minor children, those children will need to be cared for if you should die before they become adults. Naming a guardian in your will allows you to choose someone who will take over those child care responsibilities.
You can also name an executor in your last will and testament. The executor will have the legal responsibility to manage your estate after you die.
Wills and Trusts
Even though wills and revocable living trusts mainly focus on the question of inheritances, you cannot substitute one for the other. In fact, writing both of these devices at the same time is one of the best ways to ensure that your inheritance choices are met, and that your estate avoids probate. A will and a revocable living trust can be made to complement one another, serving as a safety net that protects your inheritance choices.