Many people use a living trust as an estate-planning tool, but it’s important to determine if it’s right for you. This article is intended for educational purposes only and is not legal advice. For guidance on your personal situation, please contact a lawyer.
Over the next 20 years, Americans are expected to inherit an astounding $72 trillion in assets. Whether your estate is large or modest, you likely want to pass wealth to your loved ones efficiently. You have options: you could write a will, or you could set up a living trust with an attorney’s help.
A living trust is a legal agreement you establish and control during your lifetime. It holds assets that will go to your heirs upon your passing. While a living trust can be beneficial in estate planning, it’s not for everyone, so it’s crucial to weigh the pros and cons.
The Upside of Setting Up a Living Trust
A major benefit of a living trust is that you retain control over your assets. If you change your mind, you can undo the decision or modify beneficiaries. An even bigger advantage is that it helps your beneficiaries avoid the probate process. Probate, the legal process of validating a will, can be lengthy and leave your loved ones in limbo regarding their inheritance. Additionally, probate makes wills public records. If you value privacy, a living trust can protect your loved ones’ confidentiality after your passing.
Why Might You Avoid a Living Trust?
The primary argument against a living trust is that it is generally more expensive and complicated to set up than a traditional will. While it’s advisable to use an attorney for a will, it’s not mandatory, and software options can help create a basic will easily. However, establishing a living trust without legal assistance can be challenging. You’ll need to consider if the higher cost is justified.
Moreover, if you’re hoping a living trust will serve as a tax shelter for your family, be aware that assets in a trust are still subject to estate taxes, depending on the laws at the time.
Consult a Financial Advisor
Asking an estate planning attorney if you need a living trust can be like asking an HVAC company if you should get a new air conditioner—they might say yes to get your business. Before consulting an attorney, discuss the idea with a financial advisor for an unbiased opinion. If you have a trusted estate planning attorney, seek their input as well. Should you decide to proceed with a living trust, ensure you find a highly recommended attorney to make the process as smooth as possible.