Is a Living Trust right for my Estate Plan?
Whether you need a Will or Trust depends upon a variety of issues. But here are four important factors that can make a trust a good option for your estate plan.
- Avoiding probate court expenses
- The assets and size of your estate
- Privacy
- Administration
Of course, there is more to consider. When you consult with an attorney, you can get a better understanding what’s the best estate plan.
- Avoiding Probate Court Expenses
Probate refers to the judicial system by which assets are distributed to heirs or beneficiaries once someone passes away. During probate proceedings, the court will decide who is entitled to which assets.
This process can be particularly difficult if one dies without a will. The court will need to appoint an administrator and to approve distributions to heirs. Even with a properly executed will, probate court can still be expensive.
And for large estates with many heirs, probate costs can reach thousands and thousands of dollars. These costs are particularly high if there are conflicts over inheritance between family members.
However, if you have a living trust, assets are titled in the name of the trust. Any assets that are in the name of trust when you pass away are not considered yours. Thus, the assets in the trust are not submitted to the probate court. The trustee you appointed to the trust will then distribute the assets to your beneficiaries as you instructed. This method lessens the potential for conflict and avoids probate court altogether.
That being said, you should always have a pour-over will be executed with your trust as a kind of backup safety measure. You can read more about pour-over wills here.
- Type of assets and size of estate
Larger estates with rental properties or business interests will likely benefit from a living trust. A trust will allow you to leave specific instructions for the distribution of your estate and help business operations to transition as seamlessly as possible to the next generation.
For smaller estates, a simple will specifying an executor – combined with proper transfer-on-death provisions for bank accounts and real estate – is satisfactory for your estate plan.
- Privacy
A will must be submitted to the probate court and will become a part of the public record. In contrast, a living trust allows for the private distribution of assets to beneficiaries. It is a private document. This allows you to not divulge details of distributions or the beneficiaries of the will.
- Administration
As a final note, trust is only useful if you are willing to properly administer it. While a will is written once and set aside, you can add or subtract assets to a trust as you see fit. While this has its advantages, it is also important to remember to properly title assets in the name of the trust. Over years, this can be difficult to keep up with. So, while having a trust has advantages, it can add administrative complexity to your life – however, it makes the lives of your kids and beneficiaries a lot easier after you pass away.
Conclusion
We’ve just scratched the surface. There are more pros and cons to consider when looking at trusts versus having just a simple will. In addition, it’s important to have your other essential estate planning documents, like powers of attorney and living will. You can read about those here.
During a consultation with a lawyer, you can look at all the different aspects of your estate and we can examine what type of estate plan works best for you.