Although a will is the most well-known and commonly used tool to plan for what happens to your personal possessions and financial assets in the event of your death, it is not your only option. Living trusts are becoming a popular and beneficial means of estate planning.
A “revocable living trust” involves three parties: the creator, the trustee(s) who agree to manage your assets and the beneficiaries. You are not only the creator, but you are generally one of the trustees as well so that you have the ability to change your living trust while you are alive. Successor trustees are any mentally competent adults and are usually the spouse, children or a professional fiduciary. As long as you are living and of competent mind you may alter or dissolve the trust, and it becomes irrevocable upon your death.
There are many advantages that living trusts provide for the trustee and beneficiary. First, living trusts eliminate the probate court (the court that administers the estate of a deceased person, resolves claims, and distributes property in accordance with a will or the laws of heirship). Probate court can be expensive with high lawyer costs and court fees, and may not distribute assets in direct accordance with your wishes. Because probate courts can drag on for months or years, much of your accumulated wealth or the finances of your loved ones could be in jeopardy. Unlike the issues people face in probate court, with a living trust all of your assets are simply transferred in ownership to the beneficiaries you named in your trust.
Another benefit to setting up a living trust is the protection of privacy that it comes with. If a creator is concerned with privacy they will likely opt for a living trust because living trusts are not a matter of public record, while all matters of probate courts, including beneficiaries and transactions, are always open to the public.
Living trusts may save you and your family money in the long run. Drafting a will is typically less expensive than setting up a living trust due to its complex nature, however you will likely save money by avoiding probate court in the end. Costs depend on the complexity, size of your assets and the geographic area in which you live. Prices can range from a few hundred to several thousand dollars, however you do not need a lot of money to begin the drafting of a living trust and you can fund the trust as time passes.
If you choose not to draft a will or a living trust that contains valid instructions regarding what will happen to your estate when you die, your property and assets will generally to your spouse or your closest heirs. It will become a matter for the state to decide. Because the state is only concerned with the payment of any debts, they will usually fail to consider what may have been in your best interest.
A living trust is a complicated legal document. Aside from four or five main documents necessary to begin a living trust, there is plenty of other paperwork that goes into the process. It is recommended that you at least consult with an estate planning attorney before creating a living trust.