Many people begin their estate planning efforts by drafting a will. Another common way people address their situation is through the use of a living trust. Living trusts have gained popularity in recent years, especially among those of the “baby boomer” generation. It is now common to see generic documents and online kits. Many of them claim to be fully legal, all while giving you customization features.
Because of that, some are under the impression that it is always a superior solution for every situation. While there are advantages to a living trust, it is certainly not a cure all for all estate planning issues. There are still circumstances where a Will is still perfectly suitable. This is particularly true if you do not have a lot of assets.
Living Trusts – Advantages To Consider
If you have heard nightmares about probate court, this is where a living trust can really be beneficial. The living trust avoids probate for those assets contained within it. Assets become owned by the trust when the legal title is transferred. If assets are still in the individual’s name, they will usually still be required to go through probate, so it is important to structure it properly. The living trust maintains its identity after a person’s death. The assets are managed and distributed through the terms of the trust, not a Will.
The other benefits related to probate is that a living trust will reduce legal and administrative costs for the estate and can help avoid the delay that is inherent while the estate is probated. There are always time consuming portions of properly distributing an estate. Typically, a trust can go through distribution faster and easier than a Will that is going through probate.
A living trust also maintains the privacy of the person establishing the trust when compared to a Will. Once a will is through probate, it becomes public record. Therefore, it is subject to examination and scrutiny by outsiders. Anyone with privacy concerns regarding their wishes would want to take advantage of the discretion of a living trust.
A final advantage to consider with a living trust is that it provides management of the trustee’s assets in the event they are incapacitated while still alive. The living trust can provide specific instructions for asset management and also provide care and welfare for the trustee. Without a living trust and a durable power of attorney for health care, a person may require the services of a court to appoint a guardian to handle personal matters and assets.
Disadvantages To Consider
Living trusts are usually significantly more expensive to execute than a will. The person establishing the trust will assume the costs associated in order to avoid the probate costs that would eat away at the value of their estate. Of course, this depends on the complexity and the assets involved in the process. Trusts can be difficult to properly construct. You may require extra special attention to detail in the creation. Do not forget the necessary maintenance you need to ensure a successful outcome.
For a lot of people who are talked into doing a living trust, it really is a case of overkill for their particular estate planning needs because of the time and work involved and the lack of complex assets to manage at the time of preparation. If you are in a position where a living trust is a viable solution for you, it might be best to have a lawyer or an estate planning expert assist with the planning and preparation.
As always, if you are getting a full court press from someone trying to sell you on their services, get a second opinion. Ask around for recommendations on a professional who will give you solid and honest advice. Find someone who has your best interests in mind, not just trying to make easy money from you.
Your Circumstances and Goals Dictate Your Strategy
A Will or a Living Trust may be all the estate planning you ever need. You may read about gifting strategies, transference of funds, and other methods to reduce the tax burden to your estate. Measures such as Qualified Personal Residence Trusts (QPRT), Grantor Retained Income Trusts (GRIT), Q-Tip Trusts, and Spendthrift Trust are just a few of the strategies you may come across as you do research.
Before committing to a major change in your life and going through the complexity and expense of major estate strategy, talk to some professionals. If you have a good financial planner or CPA, they should be looking at these types of legal arrangements as your estate grows in size and intricacy. Otherwise, stick with the basics and keep things up to date. You will protect your loved ones and ensure you will be able to leave the legacy you desire.