Wills and Living Trusts

Wills and Living Trusts, Compared


A Will states who you want to inherit your property. A Will also states how you want them to inherit the property. Distributions can be outright. Distributions can also be in trust, say for the benefit of a minor child or grandchild, or an adult child who is blind or disabled. And a Will appoints what in Maryland is called the “personal representative” — the executor — of your estate.

Living Trusts

A living trust provides for management of trust property during life, and distribution of trust property following death.

You must fund a living trust by titling property into the name of the trust. For example, to include your bank account in the trust, you must retitle your bank account in the name of the trust. Similarly, to make your house part of the trust, you must deed title of the house over to the trust.

And then the living trust governs that property.

  • As long as you are able, you serve as trustee, and use trust property as you wish.
  • Should you become incapacitated, the living trust names a successor trustee, for example a spouse or adult child, who manages trust property for your benefit. In this respect, with regards to trust property, a living trust acts as a kind of durable financial power of attorney.
  • And then when you die, the trustee distributes trust property to the beneficiaries, in accordance with your instructions. In this sense, with regards to trust property, a revocable living trust acts as a kind of Will substitute.

Wills and Living Trusts, Compared

It depends on your circumstances and goals as to whether a Will or a revocable living trust makes more sense for you. But here in general terms are some observations about Wills and living trusts.

Cost: A Will Often Costs Less than a Trust

First, it’s usually a lot easier and less expensive to get a Will.

Compared to a Will, a revocable living trust is typically a much longer, more involved attorney prepared document.

Also, as stated, you have to fund the trust by titling property in the name of the trust. For example, if you own a house and you want to include it in the trust estate, then an attorney must draft and record a new deed that places title of the house in the name of the trust.

So it can take much more time and effort to put a living trust in place. And consequently living trusts are often more expensive than Wills, typically thousands of dollars more expensive.

Qualifying for Medicaid: A Trust May Be Counter-Productive

A second issue to be mindful of with respect to revocable living trusts, particularly for elderly people in declining health, is Medical Assistance (Medicaid).

Medicaid is the government health insurance program that helps pay the cost of long-term nursing home care. Medicaid is means tested. In order to qualify for benefits, a Maryland nursing home resident cannot have more than $2,500 in countable assets.

With regards to Medicaid, living trusts are counter-productive.

If you need to financially qualify a nursing home resident for Medicaid, then you likely will have to retitle trust property back to the disabled person.

For example, say an unmarried individual lives in a nursing home, wants to apply for Medicaid, and owns a house. If the house is in the applicant's name, it is exempt - that is, its value is not counted toward the $2,500 asset limit. Once he or she qualifies for Medicaid, however, the government places a lien on the house. In contrast, if the house is in a living trust, it is not exempt, the house's value is fully counted, and the applicant has too many assets to qualify for Medicaid.

The reason why is: it is harder / impossible to enforce a lien against a house in a living trust. So Maryland Medicaid Liens & Estate Recovery does not allow a non-married nursing home resident to keep a house in a living trust. In order to make him or her financially eligible for Medicaid, you have to first retitle the house from the living trust back to the nursing home resident, outright and free of trust.

In the context of somebody needing long-term nursing home care, who requires government health insurance to help pay the cost of that care, that is a drawback to living trusts.

Probate: Wills Are Probated; Trusts are Not

A third difference between Wills and revocable living trusts is estate administration following the principal’s death.

Wills are probated. Probate is a court-supervised legal proceeding by which one settles a decedent’s estate. For example, under Maryland law:

  • The Register of Wills notifies all “interested persons” — that is, the individuals who are named in the Will and those who inherit in the absence of a Will — of the opening of an estate, and advises them of their legal rights.
  • The personal representative is bonded, which is to say insured.
  • The personal representative must file:
    • an inventory of all estate assets; and
    • an account, which details what happened to the funds.
  • The Register audits the inventory and account.
  • Also all interested persons can obtain copies of the inventory and account, see for themselves what is going on, and, by law, have a period of time in which to file exceptions.

In contrast, living trusts are not probated. Living trusts avoid probate — that in fact is principally what they do. Living trusts are private documents, privately administered. Typically, with inter-vivos trusts, there is no court supervision of the trustee, at all.

So an important difference between Wills and living trusts is that with Wills you have probate, and with living trusts you do not.

Under Maryland law a probate estate usually must be kept open for a minimum of 6 months. On top of that, it typically takes an additional 2 months for the Register of Wills to audit the final account. So, with regards to Wills, even in a non-contested matter, you likely will not receive a final order allowing for distribution of estate funds pursuant to a Will for the better part of one year.

In contrast, with regards to property in a living trust you might be able to start distributions within a few weeks.

So, if following your death your heir(s) might benefit from a faster distribution of your estate — say for example you have a disabled child who likely will need funds quickly to help pay for housing, health care and other basic needs — then a living trust might make a lot of sense.

For More Information or Legal Help with Your Will or Trust

The Law Office of Henry Nash practices estates and trusts law. If you have any questions or concerns about Wills and/or revocable living trusts, and want to confer with an experienced estates and trusts attorney, please feel free to contact us.