Wills and living trusts are fundamental estate planning tools that dictate what happens to your assets when you’re gone. More specifically, wills are legal documents that contain instructions about how all of your affairs will be settled after you pass. Meanwhile, living trusts are legal entities that are focused on distributing your assets according to your wishes. Living trusts are more complicated than wills, thus there’s often a difference in the cost of a living trust vs. a will. While you can hand-write a valid will at no cost at all, hiring an attorney to create and manage a living trust can cost thousands of dollars.
Having trouble navigating the estate planning process? A financial advisor can guide you in the creation of a comprehensive estate plan that will see your wishes are followed after you’re gone.
The Difference Between a Living Trust vs. Will
Estate planning involves deciding how you want your assets to be divided after you’re no longer around, and then arranging for that to happen. As you enter the early planning stages, it’s important to know the difference between wills and living trusts, as well as their costs, in order to determine which option is best for your individual needs and situation.
A will is a legal document that not only covers what happens to your assets after you pass, but can encompass all sorts of issues, including how debts will be handled as well as non-financial issues such as naming guardians for minor children. Having a will allows you to specify and enforce your own wishes rather than having your state’s inheritance laws or other laws decide what happens with your estate. A will can either be hand-written, custom-created with an online tool or template, or drawn up by an estate attorney.
Meanwhile, living trusts are legal entities. They’re created using trust documents, and are then funded by the assets you’ll transfer into them during your lifetime. When you die, the trustee you selected will oversee the distribution of the assets you placed in the trust according to your instructions. Having a living trust lets the beneficiaries of your estate get their distributions of property and assets without first going through the lengthy and costly probate process.
The Cost of a Living Trust vs. Will
The National Council on Aging has estimated that the cost of a living trust or will can range anywhere from nothing to as much as $7,000. The difference depends in part on whether you have only a will or have both a will and a living trust as part of your estate plan. Whether you choose a do-it-yourself estate planning approach or hire an estate attorney is another factor. Where you live can also play a role in the cost.
Wills are much simpler than living trusts and also less expensive. You can create a will without spending any money by either hand-writing one or using a free downloadable template. You could choose to have your signature on the will witnessed and notarized, which could cost around $10 or $20. There are also paid, online will-drafting tools, which could cost you as little as $100. Even paying an estate attorney to draft your will is still likely to cost only $300 or so, although if you have a complicated estate that requires consultation with an attorney charging hourly fees, it could be much more.
Using a living trust as part of your estate plan can set you back a significantly larger sum. If you use a free online tool or downloadable template, you can set up a trust for no cost. However, you still have to transfer assets into the trust. This can cost anywhere from nothing, if you’re transferring a bank account, for example, to $100 to $200 for transferring ownership of a piece of real estate into the trust.
Because of their complexity, it’s more common to use an attorney to draft the documents and handle the funding of a living trust. This will cost you anywhere from $1,000 to, in the case of a complex estate with lots of assets and many beneficiaries, as much as $10,000 or more.
Cost Considerations
The size, complexity, number of beneficiaries, types of property and other factors all play into the cost of a living trust vs. a will. For instance, if you want to keep a close relative from benefiting from your estate, an attorney could craft documents with safeguards in place against any legal challenge from a disgruntled would-be beneficiary.
Geography is also an important factor. In states with higher costs of living, for instance, estate attorneys tend to charge more for their services. According to legal referral site Contracts Counsel, you can get the least expensive legal advice in Illinois, where lawyers charge as little as $80 an hour. New Jersey and Ohio also offer the opportunity to hire lawyers for less than $100 per hour. The most expensive states for legal advice include, again, Illinois at up to $550 per hour, followed by Texas at $495 and Louisiana at $485.
Bottom Line
Living trusts and wills are used in many estate plans to direct the distribution of assets, settlement of debts, naming of guardians and otherwise allow you to decide in advance what will happen when you pass. Wills are the less expensive of the two, and can be created at no cost. Living trusts, including crafting the documents and transferring the assets, will cost anywhere from nothing to, in some cases, several thousand dollars.
Estate Planning Tips
- While creating an estate plan can cost money, it can cost more to not have an estate plan at all. A financial advisor can help you get started on your estate planning process. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- You may wonder about the possible impact of federal estate taxes when you start planning your estate but, as SmartAsset’s guide to federal estate taxes explains, these taxes don’t apply to most estates.
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