Living trusts can help your heirs avoid probate.
A living trust can typically be updated while you’re still alive.
They can be more expensive than wills.
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Though estate planning can seem morbid, taking steps now helps ensure your wishes are carried out and your loved ones are provided for when the time comes.
The core of your wishes may well be the disposition of your assets, i.e., who gets what, when, and how. A popular way to address that inevitability is the living trust. Basically, you transfer assets to a trust and appoint a trustee — which can be (and typically is) yourself — to manage them as you see fit. When you die, the successor trustee distributes those assets according to your instructions.
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Also known as a revocable trust, a living trust is a legal document that fulfills many of the same purposes as a traditional last will and testament. However, trusts often have a lot more flexibility.
Another biggie: You can often avoid probate. That’s the court-supervised process for authenticating your will and giving your named executor the go-ahead to distribute your assets. Your trust’s assets are not considered part of your estate and therefore no probate is needed.
Unless and until the trust becomes irrevocable, you can make changes to the trust instructions along the way, including moving assets in and out, refinancing debt, and changing beneficiaries. You also need to name a successor trustee, and that person can take over either after your death or while you’re still alive but unwilling or unable to continue managing it yourself.
Last but not least, probate is a public process, and your will becomes part of it. Trusts usually let you keep your personal business private.
There are some disadvantages to using a living trust versus a simple will. First is the initial cost. The cost for a living trust, just as with a will, can vary widely depending on the complexity and your location. According to the NOLO legal information and referral site, a simple lawyer-drafted last will and testament generally costs from about $300 to $1,200. For a trust, make that $1,000 to $2,000.
On the other hand, while a living trust costs more initially, there also can be probate costs that you’re avoiding that could help make up that difference, if the difference is significant to you.
A living trust also gives you flexibility. But that, too, can come at a cost when it comes to changing the document, including legal help and the time and energy spent thinking about how, when, and why to do that. A will may seem more set-it-and-forget it to you, although, of course, you can create a new one of those, too, if circumstances dictate.
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So, is a living trust the right option for you? If cost alone is the issue, there’s no shortage of do-it-yourself options online.
But don’t feel like you have to make that decision alone, and it may not be wise to in the end. The more complicated your affairs, the more essential it can be to consult trusted professionals to help craft an estate plan that fits your needs, avoids unnecessary costs, and efficiently passes assets to your heirs.
Thinking ahead brings peace of mind knowing you’ve responsibly planned for the future, and a living trust just might be the key to providing that good feeling of a job well done. It could give you the confidence that your wishes will get executed in the best way for you.
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