Ask The Lawyer: My husband and I want to know if it would be better to have a will or a living trust? And does our primary residence have an effect on the answer?

Posted Jan 25, 2021 6:52PM EST

There are two parts to this question. First, you are correct (sort of): your primary residence does have an effect, but the most important consideration is your domicile. Although residence and domicile are frequently used synonymously, legally they have different meanings. Residence means "a fixed abode where you actually live for the time being" whereas domicile is "the place where a person intends to eventually return and remain." In other words, you may have more than one residence but only one domicile. As an example, my parents’ domicile was in New Jersey but, as snowbirds, they were winter residents of Florida. Although a lot of snowbirds change their domicile to Florida because the state has neither an income tax nor an estate tax or inheritance tax, my parents chose to maintain New Jersey as their domicile even though they spent the winter in Florida.

Now, bear with me as I define some more terms. Everything of value that you own, whether physical (tangible) assets like an automobile or a house, and intangible property such as an IOU or other note constitutes your estate. Some assets, like savings accounts, checking accounts, and brokerage accounts are referred to as liquid assets because they can be quickly and simply converted to cash with little or no loss of value. Other assets, like homes and land are non-liquid because they can’t be readily converted to cash without a major sacrifice in value. Probate is the legal process in which a deceased person’s estate is distributed to his or her legal heirs. If there is a will, a probate court will determine if it is valid and authentic and the probate court will oversee the administration of the will. If the decedent has no will, he or she is said to have died intestate and the court will use the states’ intestacy laws to administer the decedent’s estate.

There are two kinds of assets in regard to your estate: there are probate assets (those which are distributed according to your will) and non-probate assets (distributed without the necessity of probate). Non-probate assets are those for which you've named a beneficiary as part of the instrument (such as life insurance proceeds or pensions), bank accounts (if you own them jointly or they are payable on death abbreviated POD), negotiable instruments, etc.) Even real property (your home or other real estate) and other tangible assets (your car) if they are owned jointly with rights of survivorship will transfer to the intended beneficiary outside of probate. For example, life insurance proceeds are distributed to the beneficiary upon proof of death

Back to the first part of your question. There are several important reasons for having a will. First, you’ll want to decide who will administer your estate (your executor). If you are a parent of minor children you should always nominate a guardian for your minor children particularly if you are the sole parent. If you don’t do so, the court will choose one on your behalf. Similarly, if you are the legal guardian, particularly of an incapacitated adult, you can name a successor guardian. Also, who will take care of your pets, if any (particularly important if you have parrots or other long-living pets. Your will should also leave instructions for digital assets, such as email accounts, photos, etc. By the way, you may want to name a close friend and leave instructions for them on how they should handle particularly sensitive items, such as those sexy photos you posted somewhere and may not want the world to see.

It’s also important to include guidance for how your remains should be disposed (funeral suggestions, cremation, organ or entire body donation) and if you have pre-planned this, your executor needs to have this information. Your will is also how you can leave a legacy and make charitable gifts in support of your favorite causes.

Now, in regard to whether it’s better to have a will or a trust. A living trust is another non-probate asset that will transfer outside of probate, which is a valid reason many people choose to place their assets in a living trust. Another of the many reasons for creating a trust is because certain kinds of trusts can escape federal and state estate taxes (so-called death taxes). This is why estate planning attorneys command big fees because they are creating estate plans that minimize or even completely avoid estate and other taxes. But, unless you have an estate large enough to be subject to federal estate taxes (more than $11.7 million) and/or live in a state with an estate tax or an inheritance tax, you will be unlikely to use a trust to minimize or avoid either of these taxes.
The cost of probate, which is one of the main reasons people give for wanting to put their assets into a living trust, depends on the state court where it is probated.

There are a lot of reasons for having a trust as opposed to a will. The short answer is, it depends upon what the purpose of the trust is and the kind of trust. But first, a little terminology.
Probate is the normal way to manage, settle, and distribute a decedent's estate according to the terms of the decedent's will. Probate is done through a probate court.

In general, a trust is a way of holding property, real or personal, where the holder (the trustee) doesn’t legally own that property but controls it for the benefit of another person (the beneficiary). The creator of the trust is called the settlor. 
Trusts are either irrevocable (they cannot be revoked or altered) or they are revocable (wherein the settlor reserves to himself or herself the right to revoke the trust. 

Trusts are either created during the settlor’s lifetime (an inter vivos or IV trust), or upon the settlor’s death (a testamentary trust) as part of the probate of a will. You can even create an unfunded IV trust which only gets funded after your death.

There are several types of trusts and the most common trusts are (a) bypass and other tax avoidance trusts; (c) irrevocable life insurance trusts (ILIT); (c) spendthrift trusts; (d) special needs trusts; (e) trusts for minors or an incapacitated spouse; and (f) living trusts. There are other kinds of trusts but they are beyond the scope of this answer.

Even if you have created an IV trust, you will still need a will to dispose of any part of your estate not in the trust. This can happen if you acquired assets after you created the IV trust and never got around to transferring the asset into the trust or if you just plain forgot to do so. You also need a will to make certain important personal decisions. For example, who will decide to dispose of your remains and how (cremation, burial, donation). If you have minor children, you should name a guardian for them. Don't forget to make similar arrangements for your pets, especially long-lived ones such as parrots (they can outlive their owners by many years).

Stephen welcomes your questions about legal issues related to older gay men. Please read his bio and disclaimer and contact him through the form at the bottom of it if you have a question for him.