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Living Trust or Will: What’s Right for You in Canada?

Posted at | Categorised in estate law and wills, estate planning, money, trusts and estates law, wealth

In estate planning, the two most frequently used instruments are wills and living trusts. Each serves to guarantee that your possessions end up with the appropriate individuals once you pass away; however, they operate distinctly and fulfill varied roles. The decision between these options hinges on your particular circumstances, familial requirements, and fiscal objectives.

Grasping these main distinctions can assist you in making the appropriate choices for your estate planning requirements and provide assurance regarding your family’s wellbeing, particularly if you have young children or intend to transfer assets.

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Table of Contents

What Is a Will?

A will is a legally binding paper that specifies how you wish your possessions to be shared out following your death. Consider it your last set of directions for both your family members and the judicial system regarding the disposition of all your belongings.

Here’s how a will functions:

People who get your possessions when you pass away

You can precisely designate which family members, friends, or organizations receive which particular assets.
Allows you to select a guardian for your minor children

This is essential for parents aiming to guarantee their children are looked after by a person they have confidence in. Additionally, you may select “backup” guardians should your primary choice be incapable of taking care of the children for any reason.
It only comes into play after death.

Unlike other estate planning instruments, a will does not affect your assets during your lifetime.
Needs to be processed through the probate court.

Once you pass away, the court examines your will and manages how your assets are distributed.

A will provides you with authority over your estate and aids in averting familial conflicts by explicitly outlining your preferences. In the absence of such a document, provincial regulations dictate the distribution of your possessions, potentially leading to outcomes that diverge from your intentions.

What Does a Living Trust Entail?

A living trust is a legal setup wherein you transfer the ownership of your possessions to a trust during your lifetime. Usually, you act as the trustee, retaining complete management of these assets, and appoint a successor trustee who will step in upon your death or incapacity.

Here’s how a living trust operates:

Safeguards your assets during your lifetime

: You move ownership of properties, investments, and other assets into the trust.
Allow someone to handle your assets if you fall ill or become disabled.

Your successor trustee can take over managing your matters if you’re incapable of doing so.
Avoids probate court upon your death

Assets within the trust move directly to the beneficiaries without involving the courts, thus avoiding the necessity of going through probate.
Often more discreet than a will

: Trust documents aren’t public records, keeping your financial affairs private.

Revocable living trusts are especially beneficial for individuals aiming to bypass the lengthy process, expenses, and transparency issues associated with probate court. These trusts allow you to impose specific conditions on asset management and also enable you to designate several beneficiaries.

Main Distinctions Between a Will and a Living Trust

Wills and living trusts each fulfill different roles, which means they operate with fundamental distinctions. Below is a brief overview:

When Is It Necessary to Have a Will?

A will is sensible in various particular circumstances:

You’d like to choose a guardian for your children:

Only a will can officially specify whom should take care of your minor children if anything were to happen to you.
Your estate is quite straightforward:

If your assets primarily consist of modest properties or straightforward investments, a basic will may suffice for your needs.
It doesn’t bother you to go through probate:

Many individuals feel at ease with the probate procedure, particularly when their estate is uncomplicated and their heirs do not mind waiting for the assets to navigate through this process.
If you wish to leave behind personal belongings or messages:

Will documents allow you to express your individual preferences, allocate meaningful possessions, and also convey messages to those dear to you.

For numerous households, particularly those possessing limited resources and having small kids, a will offers adequate safeguarding at a reasonable price. Wills additionally provide you with the chance to allocate your possessions as you see fit.

prefer not to include in a living trust

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At What Point Should You Think About Establishing a Living Trust?

Utilizing a revocable living trust (frequently alongside a last will and testament) can be advantageous in the following scenarios:

You have properties across several states.

This could complicate and increase the cost of probate, as you may have to undergo the process in each state.
You aim to bypass probate

If speed and privacy in asset distribution matter to you, a trust enables your beneficiaries to obtain the assets more swiftly.
You want someone to take charge if you fall ill.

Unlike a will, a trust offers safeguarding if you become incapacitated and are unable to handle your financial matters.
You prioritize privacy instead of involving the courts.

Trust documents stay confidential, whereas wills become part of the public record during probate. Thus, you can utilize a living trust to keep details about your assets and how they should be distributed out of the public eye.

Living trusts are especially beneficial for senior citizens, individuals with substantial wealth, or persons holding intricate investment portfolios.

Is It Possible to Have Both a Will and a Living Trust?

Certainly, numerous individuals opt to have both a will and a living trust. The trust typically manages the majority of their possessions, with a “pour-over” will ensuring that any asset left out of the trust still gets included in their estate plan. For instance, this could involve designating guardians for minor children or allocating items not previously assigned to the trust.

Utilizing both a will and a living trust provides the advantages of each tool: The trust manages significant assets discreetly and effectively, whereas the will addresses custody arrangements and any property not transferred to the trust.

Advantages and Disadvantages of Every Choice

Both wills and living trusts have their own set of advantages and drawbacks (this is why combining them can benefit certain families). Let us examine the pluses and minuses of each one.

Advantages of Drafting a Will

Simple and inexpensive to make
Names of guardians
Suitable for modest estates or individuals with straightforward asset allocation

Drawbacks of Maintaining a Will

Passes through probate, a process that may last from a few months to multiple years.
The will is part of the public record, offering you no privacy.
Your assets are safeguarded while you’re still living.

Advantages of Maintaining a Living Trust

Completely bypasses probate, maintaining privacy for your estate matters
Contesting a living trust is significantly more challenging compared to contesting a will, which may provide greater assurance that your intentions will be followed.
Could assist if you face disability, since reliable trustees can manage your assets should you be incapable of doing so yourself.

Disadvantages of Establishing a Living Trust

It often requires a significantly higher initial investment, potentially adding thousands of extra dollars.
Managing it requires more effort, which may prove irritating for certain individuals.
Does not appoint guardians, so you still require a will if you have young children or wish to distribute particular assets not covered by the trust.

How to Determine Which One Suits You Best

Are you still unsure about whether a living trust or a will suits your needs better?

Selecting between a will and a living trust relies on your specific situation. Take into account the following steps:

Evaluate your age, health, and wealth size

Younger individuals with straightforward estates typically begin with a will, whereas older persons with substantial assets might find a trust more advantageous.
Consider your privacy and familial requirements.

If maintaining your privacy or avoiding family disputes is important to you, a trust could be a more suitable option.
Consult with a lawyer specializing in estate planning.

They can assist you in grasping the advantages and disadvantages tailored to your particular circumstances.

A basic will might suffice for numerous households.

Don’t let yourself be pushed into a complicated trust arrangement if your requirements are simple.

A trust is beneficial when you desire control and wish to bypass the courts.

For individuals seeking to reduce court participation and maintain privacy.

Remember, you can always

begin with a will

create a trust

later

As your financial circumstances become more intricate, you also have the choice to establish both.

How to Establish a Will or Living Trust

Beginning the process of estate planning doesn’t need to feel daunting. You can start with these steps:

Create a list of your possessions.

Include your residence, financial assets, banking accounts, individual possessions, and all outstanding liabilities.
Choose your beneficiaries

Determine who will get which items, and think about alternative options in case your top picks cannot take over as heirs.
Choose a reliable executor or trustee

This individual will manage your matters, so select someone reliable and eager to assume this responsibility.
Choose guardians for your will

If you have young children, thoughtfully think about whom would be the most suitable caretaker for them.
Utilize a legal service or consult an estate planning lawyer.

Although online resources are available, intricate estates frequently profit from professional expertise.
Store documents in a secure location and revise them when necessary.

: Safely store your documents and revisit them following significant life changes such as weddings, divorces, or the birth of a child.

Should you continue feeling overwhelmed, keep in mind that the crucial part is beginning. A simple will is far superior to having no estate plan whatsoever.

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Living Trust versus Will: Which Is Actually Necessary for You?

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